Use the information below to answer questions 39 and 40.Jumoke and Kunle have an original investment of ₦25,000 and ₦15,000 respectively in a partnership. T...

Use the information below to answer questions 39 and 40.Jumoke and Kunle have an original investment of ₦25,000 and ₦15,000 respectively in a partnership. The articles of partnership provides 3% interest on capital and salaries of ₦1,500 and ₦1,000 respectively for the partners. The profits and losses are to be shared in the ratio 3:2.

Miscellaneous expenses of ₦2,500 were incurred with gross profit of ₦6,500 during the financial year.The balance of profit and loss account will be?

Answer Details

To calculate the balance of profit and loss account, we need to follow these steps: Step 1: Calculate the interest on capital for each partner Jumoke's interest on capital = 3% of ₦25,000 = ₦750 Kunle's interest on capital = 3% of ₦15,000 = ₦450 Step 2: Calculate the salaries for each partner Jumoke's salary = ₦1,500 Kunle's salary = ₦1,000 Step 3: Calculate the total expenses Total expenses = salaries + interest on capital + miscellaneous expenses Total expenses = ₦1,500 + ₦1,000 + ₦750 + ₦450 + ₦2,500 Total expenses = ₦6,200 Step 4: Calculate the net profit Net profit = gross profit - total expenses Net profit = ₦6,500 - ₦6,200 Net profit = ₦300 Step 5: Allocate the net profit based on the profit sharing ratio Jumoke's share = 3/5 * ₦300 = ₦180 Kunle's share = 2/5 * ₦300 = ₦120 Step 6: Calculate the balance of profit and loss account Balance of profit and loss account = Jumoke's share - Jumoke's salary + Kunle's share - Kunle's salary Balance of profit and loss account = ₦180 - ₦1,500 + ₦120 - ₦1,000 Balance of profit and loss account = ₦4,000 Therefore, the correct answer is ₦4,000.