Aashish withdrew Rs. 10,000 per month from the firm for his personal use during the year ending March 31, 2017. Calculate the interest on drawings, which is charged @8% p.a., when the amount is withdrawn at the beginning of each month-
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Rs. 5,200
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Drawings = ₹10,000 per month
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Withdrawn at the beginning of each month
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Period = 12 months (April 2016 – March 2017)
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Rate of interest = 8% p.a.
For withdrawals at the beginning of each month, average period = 6.5 months.
Total Drawings=10,000×12=1,20,000
Interest on Drawings=Total Drawings× Rate × Average Period/12
Interest=1,20,000× 8/100 x 6.5/12 = ₹5,200