When equal amounts are withdrawn in the beginning of each quarter throughout the year, the interest on partner's drawings are charged for how many months ?
Answer & explanation
Correct answer: option 3
The correct answer is option 3- 7.5.
If the amount is withdrawn at the beginning of each quarter, the interest is calculated on the total money withdrawn during the year, for a period of seven and half months.
Ist drawing = 1st April, so months left after it are 12.
Last drawing = 1st Jan, so months left after it are 3.
Average Period = (No. of months left after 1 drawings + No. of months left after last drawings)/2
= (12+3)/ 2
= 7.5 months
Interest on Drawings = Total of drawings × Rate/100 × 7.5/12