Question

If a partner withdraws equal amount at the end of each quarter, then _____ are to be considered for interest on total drawings.

• A. $5.5$ months
• B. $6$ months
• C. $4.5$ months
• D. $7.5$ months

Hint:

For Quarterly Drawings: * Beginning of every quarter $\rightarrow 7.5$ months * Middle of every quarter $\rightarrow 6$ months * End of every quarter $\rightarrow 4.5$ months

Answer 1

The Correct Option is C

Step 1: Understanding the Concept:
Calculating interest using the average period method for drawings at the end of each quarter.
Key Formula or Approach:
\[ \text{Average Period} = \frac{\text{Months left after first drawing} + \text{Months left after last drawing}}{2} \]
Step 2: Detailed Explanation:
1. First drawing is at the end of the first quarter (e.g., June 30th). Months left = 9.
2. Last drawing is at the end of the last quarter (e.g., March 31st). Months left = 0.
Applying the formula:
\[ \text{Average Period} = \frac{9 + 0}{2} = 4.5 \text{ months} \]
Step 3: Final Answer:
Interest is calculated for 4.5 months.