CMA Foundation · Fundamentals of Financial and Cost Accounting · Joint Venture
Mohan and Nitin share venture profits 3:2, and each keeps full records. Mohan bought goods for Rs 50,000 and spent Rs 4,000 on expenses. Nitin sold all the goods for Rs 80,000 and received the cash. He paid expenses of Rs 2,000 and is entitled to a commission of 5% on sales, in addition to his profit share. What amount must Nitin remit to Mohan to settle?
Nitin must remit Rs 66,000. After deducting commission of Rs 4,000 the profit is Rs 20,000, giving Mohan Rs 12,000. Mohan is owed his outlay of Rs 54,000 plus Rs 12,000. Equivalently, Nitin keeps Rs 14,000 of the Rs 80,000 he holds.
- ARs 66,000Correct
- BRs 70,000
- CRs 72,000
- DRs 54,000
Explanation
Commission = 5% of 80,000 = 4,000. Profit = 80,000 - 50,000 - 4,000 - 2,000 - 4,000 = 20,000, so Mohan's share is 12,000 and Nitin's is 8,000. Mohan is due 54,000 + 12,000 = 66,000. Check: Nitin keeps 2,000 + 4,000 + 8,000 = 14,000 from 80,000, leaving 66,000. Rs 70,000 omits the commission from Nitin's entitlement.
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