Q4. Calculate the interest of drawing Mr. Navdeep @10% p.a. for the year ender
31st March 2020 in each of the following alternative cases
Case A: If he withdraw Rs. 20,000 in the beginning of each quarter.
Case B: If he withdraw Rs. 5000 per month during the year. (2×3=6)
Case C: If he withdraw Rs. 5000 per month at the end of every month.
Answers
CASE 1 : when equal amount of drawings withdrawn at the beginning of each quarter interest is calculated for a period of 7.5 months.
Hence,
20000 × 10/100 × 7.5/12 = 1250
Interest on drawing = 1250
CASE 2 : If he withdraw 5000 per month during the year
then....
5000 × 12 = 60000
60000 withdrawn during the whole year
hence,
60000 × 10/100 = 6000
Interest on drawing = 6000
Case A:
If he withdrew Rs 20,000 at the beginning of each quarter,
Interest on drawings = Total drawings × (Rate ÷ 100) × (7.5 ÷ 12)
We have,
- total drawings = Rs 20,000 × 4 = Rs 80,000
- rate = 10%
Substituting them in the formula,
Interest on drawings = Rs 80,000 × (10 ÷ 100) × (7.5 ÷ 12)
Interest on drawings = Rs 5,000
Therefore, the interest on drawings when he withdrew Rs 20,000 at the beginning of each quarter is Rs 5,000.
Case B:
If he withdrew Rs 5,000 per month during the year,
Interest on drawings = Total drawings × (Rate ÷ 100) × (6 ÷ 12)
We have,
- total drawings = Rs 5,000 × 12 = Rs 60,000
- rate = 10%
Substituting them in the formula,
Interest on drawings = Rs 60,000 × (10 ÷ 100) × (6 ÷ 12)
Interest on drawings = Rs 3,000
Therefore, the interest on drawings when he withdrew Rs 5,000 per month during the year is Rs 3,000.
Case C:
If he withdrew Rs 5,000 per month at the end of every month,
Interest on drawings = Total drawings × (Rate ÷ 100) × (5.5 ÷ 12)
We have,
- total drawings = Rs 5,000 × 12 = Rs 60,000
- rate = 10%
Substituting them in the formula,
Interest on drawings = Rs 60,000 × (10 ÷ 100) × (5.5 ÷ 12)
Interest on drawings = Rs 2,750
Therefore, the interest on drawings if he withdrew Rs 5,000 per month at the end of every month is Rs 2,750.