When equal amounts are withdrawn in the middle of each quarter throughout the year, the interest on drawings are charged for how many months?
Answer & explanation
Correct answer: option 2
The correct answer is option 2- 6.
When equal amounts are withdrawn in the middle of each quarter throughout the year, the interest on drawings are charged for 6 months.
First drawing = 15 May, So months left are 10.5.
Last drawing = 15 Feb, So months left are 1.5.
Average period = (Months left after ist drawing + months left after last drawing)/2
= (10.5 + 1.5)/2
= 12/2
= 6 months
So, Interest on Drawings = Total of drawings × Rate/100 × 6/12