Use the following information to answer the question below
Ata. Bubu and Chikum were in partnership sharing profits and losses in proportion to their capital contributions:
Capital Drawings
Ata 40,000 8,000
Bubu 30,000 5000
Chikum 20,000 -
Net profit for the year was 40,500 and the interest on capital was 5% per annum.
The profit available for sharing by the partners is
To calculate the profit available for sharing among the partners, we need to first calculate the total capital of the partnership:
Total capital = Ata's capital + Bubu's capital + Chikum's capital
Total capital = 40,000 + 30,000 + 20,000
Total capital = N90,000
Next, we need to calculate the interest on capital for each partner:
Ata's interest on capital = 5% of 40,000 = 2,000
Bubu's interest on capital = 5% of 30,000 = 1,500
Chikum's interest on capital = 5% of 20,000 = 1,000
Now, we can calculate the total interest on capital:
Total interest on capital = Ata's interest on capital + Bubu's interest on capital + Chikum's interest on capital
Total interest on capital = 2,000 + 1,500 + 1,000
Total interest on capital = N4,500
The net profit for the year was N40,500. We need to subtract the interest on capital from the net profit to get the profit available for sharing:
Profit available for sharing = Net profit - Total interest on capital
Profit available for sharing = 40,500 - 4,500
Profit available for sharing = N36,000
Therefore, the profit available for sharing among the partners is N36,000. Option C matches this answer.