A & B are partners sharing profits and losses in a ratio of 2:3 with capitals of ₹2,00,000 and ₹1,00,000 respectively. Drawings are made by a partner of ₹5,000 per month. Interest on drawings is to be charged @ 10% p.a. A gives a guarantee to B for his share of profit of ₹10,000. If any deficiency arises, it will be borne by A. A gives a loan of ₹20,000 to the firm at which interest is to be provided @ 8% p.a.
What will be the interest on drawings if A withdraws money at the end of each month?
Answer & explanation
Correct answer: option 4
The correct answer is option 4- ₹2,750.
Total drawings = 5,000 x 12
= 60,000
Months left after ist drawing = 11
Months left after last drawings = 0
Average period = (11+0) /2
= 5.5 months
Interest on drawings = 60,000 x 10/100 x 5.5/12
= ₹2,750