Use the following information to answer the given question, \(\begin{array}{c|c} & Baba & Tude\\ & N & N \\ \hline \text{Capital Accounts 1 January, 2000} &...
Question 1 Report
Use the following information to answer the given question,
\(\begin{array}{c|c} & Baba & Tude\\ & N & N \\ \hline \text{Capital Accounts 1 January, 2000} & 40,000 & 50,000\\ \text{Current Accounts 1 January, 2000} & 20,000Cr & 15,000Cr \\ \text{Drawings during the year} & 4,000 & 15,000\\ Salaries & 5,000 & 5,000\end{array}\)
Interest on capital is 10%, the net profit for the year is N40,000. Baba's Current Account balance on 31st December, 2000 is
\(\begin{array}{c|c} & Baba & Tude\\ & N & N \\ \hline \text{Capital Accounts 1 January, 2000} & 40,000 & 50,000\\ \text{Current Accounts 1 January, 2000} & 20,000Cr & 15,000Cr \\ \text{Drawings during the year} & 4,000 & 15,000\\ Salaries & 5,000 & 5,000\end{array}\)
Interest on capital is 10%, the net profit for the year is N40,000. Baba's Current Account balance on 31st December, 2000 is
Answer Details
To find Baba's Current Account balance on 31st December, 2000, we need to calculate his share of the net profit for the year, which is calculated as follows:
Baba's share of capital = N40,000
Baba's interest on capital (10% of N40,000) = N4,000
Baba's share of net profit (after deducting salaries) = N31,000 (i.e. N40,000 - N5,000)
Baba's total credit balance in his Current Account during the year = N20,000
Baba's drawings during the year = N4,000
Therefore, Baba's Current Account balance on 31st December, 2000 is:
N20,000 - N4,000 + N31,000 + N4,000 = N51,000
Therefore, the answer is option A, N35,500.
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