Partnership profit allocation with interest on capital

Steps:

• Calculate total capital: $50,000 +$30,000 = $80,000.
• Compute interest on capital at 10%: total interest = 10% × $80,000 =$8,000, shared in capital ratio 5:3 (X: $5,000; Y:$3,000).
• Determine remaining profit: $37,000 -$8,000 = $29,000, shared in capital ratio 5:3 (Y's share: 3/8 ×$29,000 = $10,875).
• Y's total profit share: $3,000 +$10,875 = $13,875 (equivalent to 3/8 ×$37,000 since both components follow capital ratio).

Why B is correct:

• Y's share equals 3/8 of total profit ($37,000 × 0.375 =$13,875), as interest and remaining profit both allocate proportionally to capital per partnership agreement.

Why the others are wrong:

• A: Understates Y's remaining profit share (e.g., ignores full 3:5 ratio on $29,000).
• C: Assumes equal sharing of remaining profit ($3,000 +$14,500 = $17,500, but adjusted incorrectly).
• D: Applies Y's ratio to X's full share ($37,000 × 5/8 =$23,125).

Final answer: B