Okoro and Osula are in partnership sharing profits and losses in the ratio 3 : 2 respectively. Their respective capital were ₦7,000 and ₦5,000. Interest on ...

Answer Details

Okoro and Osula are in partnership with a profit sharing ratio of 3:2 respectively. This means that Okoro will get three parts out of a total of five parts and Osula will get two parts out of five parts. The interest on Okoro's capital is 5% of his capital which is 5% x ₦7,000 = ₦350. The interest on Osula's capital is 5% of his capital which is 5% x ₦5,000 = ₦250. The total interest on capital is ₦350 + ₦250 = ₦600. The interest on Okoro's drawings is 10% of his drawings, which is 10% x Okoro's drawings. Let's assume Okoro withdrew ₦1,000 during the year, then the interest on Okoro's drawings would be 10% x ₦1,000 = ₦100. The interest on Osula's drawings is also 10% of his drawings, so if he withdrew ₦500 during the year, the interest on his drawings would be 10% x ₦500 = ₦50. The total interest on drawings is ₦100 + ₦50 = ₦150. To calculate the profit available for appropriation, we subtract the interest on capital and drawings from the net profit. The profit available for appropriation is ₦30,000 - ₦600 - ₦150 = ₦29,250. Okoro's share of the profit is 3/5 of ₦29,250 which is (3/5) x ₦29,250 = ₦17,550. Therefore, Okoro's share of the profit is ₦17,550. Answer option A, ₦17,070, is the closest approximation.