The partnership agreement of X and Y provides that interest at 5% per annum is to be charged on partners' drawings.During year ended 31 December 2011 drawings by X were: $\begin{array}{lr}&\$\
1 \text { February 2011 } & 2400 \
1 \text { June 2011 } & 4800 \
1 \text { August 2011 } & 960
\end{array}$ What is the total amount of interest on drawings chargeable to X's current account for the year?

Question

Quizplus · Accepted Answer

Interest on drawings is calculated based on the time the money was withdrawn. For X:  - $2400 from 1 Feb to 31 Dec (11 months): $2400 * 5% * 11/12 = $110  - $4800 from 1 Jun to 31 Dec (7 months): $4800 * 5% * 7/12 = $140  - $960 from 1 Aug to 31 Dec (5 months): $960 * 5% * 5/12 = $20  Total interest = $110 + $140 + $20 = $270.