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WAEC SSCE - Financial Accounting - 1993 (Objective)

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 Johnson's drawing is?
Answer Details
To calculate the interest on Johnson's drawings, we first need to determine the total amount of his drawings. From the given information, we know that Johnson's drawings were N3,000. Next, we need to calculate the interest on his drawings at a rate of 10%. To do this, we can use the simple interest formula: Interest = (Principal x Rate x Time)/100 Here, the principal is the amount of Johnson's drawings, which is N3,000. The rate is 10%, and we need to convert it to a decimal by dividing by 100, giving us 0.1. The time is not given explicitly, but we can assume that it is for the entire year, as this is a standard assumption in accounting. Therefore, the time is 1 year. Substituting these values into the formula, we get: Interest = (3000 x 0.1 x 1)/100 = N300 Therefore, the interest on Johnson's drawings is N300. Answer (B) is correct. In summary, we calculated the interest on Johnson's drawings by using the simple interest formula, which takes into account the principal, rate, and time. We assumed that the time was for the entire year and found that the interest on Johnson's drawings was N300.
Read lesson note on Partnership Accounts (WAEC)
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