Use the information below to answer this question The partnership agreement between Abba, Baba and Kaka contains the following provision: (i) 5% interest to...

Use the information below to answer this question The partnership agreement between Abba, Baba and Kaka contains the following provision:

(i) 5% interest to be paid on capital and no interest to be charged on drawings

(ii) Profits and losses to be shared in the ratio 3:2:1 respectively

(iii) net profit as at 31/12/95 ₦2,250.

.................Abba......Baba.......Kake

Capital..........5000......4000......3000

Current account...250......100.......175

Salary............300......300.......---

Drawings..........600......500........250

Current account balance of Kaka at the end of the year will be

Answer Details

To calculate the current account balance of Kaka at the end of the year, we need to consider all the transactions that have affected his current account during the year. Kaka started the year with a current account balance of ₦175. He also had a capital contribution of ₦3000 and received no salary during the year. Kaka made a total of ₦250 in drawings during the year, but no interest is charged on drawings according to the partnership agreement. Kaka's share of the net profit for the year is calculated as follows: Net profit = ₦2,250 Kaka's share = 1/6 x ₦2,250 = ₦375 Finally, we need to take into account the interest paid on capital. Kaka's capital contribution was ₦3000, and the interest rate according to the partnership agreement is 5%. Therefore, Kaka is entitled to receive an interest payment of 5% of ₦3000, which is ₦150. To calculate Kaka's current account balance at the end of the year, we need to add up all the transactions that affected his current account: Starting balance: ₦175 Plus share of net profit: ₦375 Plus interest on capital: ₦150 Minus drawings: ₦250 Therefore, Kaka's current account balance at the end of the year is: ₦175 + ₦375 + ₦150 - ₦250 = ₦450 - ₦250 = ₦200 So, the correct answer is not among the options given. The current account balance of Kaka at the end of the year is ₦200.