Use the following information to answer the given question. John and Johnson are in partnership, sharing profit and losses in the ratio 3 : 2. Other informa...
Question 1 Report
Use the following information to answer the given question.
John and Johnson are in partnership, sharing profit and losses in the ratio 3 : 2. Other information are as follows:
\(\begin{array}{c|c} \text{Capital} & \text{ - John} & N20,000 \\ & \text{ - Johnson} & N10,000 \\ Drawings & \text{ - John} & 2,000 \\ & \text{ - Johnson} & 3,000 \\ \text{Interest on capital} & & \text{5%} \\ \text{Interest on drawings} & & \text{10%} \\ Profit & & N6,000\end{array}\)
Interest on John's drawings is
John and Johnson are in partnership, sharing profit and losses in the ratio 3 : 2. Other information are as follows:
\(\begin{array}{c|c} \text{Capital} & \text{ - John} & N20,000 \\ & \text{ - Johnson} & N10,000 \\ Drawings & \text{ - John} & 2,000 \\ & \text{ - Johnson} & 3,000 \\ \text{Interest on capital} & & \text{5%} \\ \text{Interest on drawings} & & \text{10%} \\ Profit & & N6,000\end{array}\)
Interest on John's drawings is
Answer Details
To calculate the interest on John's drawings, we first need to find out his capital account balance at the end of the accounting period.
John's initial capital is N20,000, and he made drawings of N2,000. Therefore, his capital at the end of the period will be:
N20,000 - N2,000 = N18,000
Next, we need to calculate the interest on John's drawings at a rate of 10%.
The formula for calculating interest on drawings is:
Interest on Drawings = Drawings x Rate of Interest
So, for John, the interest on his drawings will be:
N2,000 x 10% = N200
Therefore, the answer is N200.
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