Question

If a partner withdraws a fixed amount at the end of each quarter, interest on drawings will be charged for ........ months.

• A. 9
• B. \( 7 \frac{1}{2} \)
• C. 6
• D. \( 4 \frac{1}{2} \)

Hint:

For fixed withdrawals at the end of each quarter, the average period is always \( 4 \frac{1}{2} \) months for interest on drawings.

Answer 1

The Correct Option is D

When a partner makes a fixed withdrawal at the close of each quarter, the average interest-charging period is determined by the formula: \[ \text{Average Period} = \frac{\text{Time from First Withdrawal + Time from Last Withdrawal}}{2}. \] The withdrawal timing and remaining periods are as follows: - End of 1st quarter: Remaining time is 9 months. - End of 2nd quarter: Remaining time is 6 months. - End of 3rd quarter: Remaining time is 3 months. - End of 4th quarter: Remaining time is 0 months. Applying this to calculate the average period: \[ \text{Average Period} = \frac{9 + 0}{2} = 4.5 \text{ months}. \] Therefore, the correct option is (D).