M and N are partners in a firm and agree that an interest @12% per annum should be charged on drawings. M draws ₹20,000 per month at the beginning of each month. The amount of interest to be charged from M is:
Answer & explanation
Correct answer: option 3
The correct answer is option 3- ₹15,600.
* Calculation of average period:
Ist drawing = 1st April, so months left after it are 12.
Last drawing = 1st March, so months left after it are 1.
Average Period = (No. of months left after 1 drawings + No. of months left after last drawings)/2
= (12+1)/ 2
= 6.5 months
* M drawings per month = 20,000
Total drawings in the year = 20,000 x 12
= 2,40,000
* Interest rate = 12% p.a.
* Interest on drawings = Total drawings x (Average period/12) x (Interest rate/100)
= 2,40,000 x (6.5/12) x (12/100)
= 15,600
Thus, interest on M' Drawings is 15,600.