Aaron has £50,000 of capital invested in the partnership on 1 January 20X1. He introduced a further £25,000 on 1 July 20X1. The partnership has a year end of 31 December 20X1. The partnership agreement states that interest should be credited to partners at the rate of 5% per annum on capital invested in the partnership. The interest on this drawing for the year to 31 December 20X1 is:

Question

Quizplus · Accepted Answer

Aaron earns 5% interest on £50,000 for the full year and 5% on the additional £25,000 for half a year. This results in £2,500 (5% of £50,000) + £625 (5% of £25,000 for half a year) = £3,125.

Aaron Has £50,000 of Capital Invested in the Partnership on 1