Paper 3 · November 2015 · Partnership Accounts

A partner had made a 6% loan of $12,000 to his partnership. On the dissolution he is to receive sufficient 8% debentures in the purchasing company to give him the same annual return as the loan gave him. Calculate, in dollars, the nominal value of 8% debentures he must receive.

Model answer

9000

Also accepted: $9 000, 9 000

Explanation

The loan paid him 6% x $12,000 = $720 a year. To earn $720 from 8% debentures he needs

720 / 0.08 =

9,000 of debentures.

Derived from ZIMSEC Accounting 9197/3 Paper 3 (Case Study), November 2015, Q1

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