question_answer

Read the following hypothetical text and answer the given questions:

Sia and Pia were partners in a fast-food comer sharing profits and losses in ratio 3 : 2. They sold fast food items across the counter and did home delivery too. Their initial fixed capital contribution was Rs. 60,000 and Rs. 40,000 respectively.

At the end of first year their profit was Rs. 60,000 before allowing the remuneration of Rs. 1,500 per quarter to Sia and Rs. 1,000 per half year to Pia. Such a promising performance for first year was encouraging, therefore, they decided to expand the area of operations.

For this purpose, they needed a delivery van, a few Scotties and an additional person to support. Six months into the accounting year they decided to admit Tia as a new partner and offered him 20% as a share of profits along with monthly remuneration of Rs.1.250. Tia was asked to introduce Rs. 65,000 for capital and Rs. 35.000 for premium for goodwill. Besides this Tia was required to provide Rs. 50,000 as loan for two years.

Tia readily accepted the offer. The terms of the offer were duly executed and he was admitted as a partner.

Based on the above information you are required to answer the following questions:

While taking up the accounting procedure for this

reconstitution the accountant of the firm Mr. Gupta a faced a difficulty. Solve it be answering the following:

For the amount of loan that Tia has agreed to provide, he is entitled to interest thereon at the rate of:

A) 6% p.a.                                    

B) 5% p.a.    

C) 5.5% p.a.                                 

D) 6.5% p.a.