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What time would be taken into consideration if equal monthly amount is drawn as drawings at the beginning of each month?
- a)7 months.
- b)6 months.
- c)5 months.
- d)6.5 months.
Correct answer is option 'D'. Can you explain this answer?
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What time would be taken into consideration if equal monthly amount is...
Question Analysis:
The question asks about the time period that needs to be considered if equal monthly amounts are drawn at the beginning of each month. We need to determine the number of months that would be considered.
To find the time period, we need to consider the timing of the drawings and the frequency of the drawings.
Timing of the Drawings:
The drawings are made at the beginning of each month. This means that the first drawing is made at the beginning of the first month, the second drawing at the beginning of the second month, and so on.
Frequency of the Drawings:
The equal monthly amounts are drawn. This means that the same amount is drawn every month.
Calculating the Time Period:
To calculate the time period, we need to determine the number of months that would be considered. We can do this by dividing the total amount drawn by the monthly amount.
Let's assume the total amount drawn is T and the monthly amount is M.
The number of months considered can be calculated using the formula:
Number of months = Total amount drawn / Monthly amount
In this case, since the monthly amount is drawn at the beginning of each month, we need to consider the amount drawn for a partial month.
Let's consider an example:
If the total amount drawn is $100 and the monthly amount is $20, then the number of months considered would be:
Number of months = $100 / $20 = 5 months
Therefore, the correct answer is option C: 5 months.
Final Answer:
The correct time period that needs to be taken into consideration if equal monthly amount is drawn at the beginning of each month is 5 months.
The question asks about the time period that needs to be considered if equal monthly amounts are drawn at the beginning of each month. We need to determine the number of months that would be considered.
To find the time period, we need to consider the timing of the drawings and the frequency of the drawings.
Timing of the Drawings:
The drawings are made at the beginning of each month. This means that the first drawing is made at the beginning of the first month, the second drawing at the beginning of the second month, and so on.
Frequency of the Drawings:
The equal monthly amounts are drawn. This means that the same amount is drawn every month.
Calculating the Time Period:
To calculate the time period, we need to determine the number of months that would be considered. We can do this by dividing the total amount drawn by the monthly amount.
Let's assume the total amount drawn is T and the monthly amount is M.
The number of months considered can be calculated using the formula:
Number of months = Total amount drawn / Monthly amount
In this case, since the monthly amount is drawn at the beginning of each month, we need to consider the amount drawn for a partial month.
Let's consider an example:
If the total amount drawn is $100 and the monthly amount is $20, then the number of months considered would be:
Number of months = $100 / $20 = 5 months
Therefore, the correct answer is option C: 5 months.
Final Answer:
The correct time period that needs to be taken into consideration if equal monthly amount is drawn at the beginning of each month is 5 months.
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What time would be taken into consideration if equal monthly amount is...
Understanding Drawings in Accounting
When calculating the time value of equal monthly drawings made at the beginning of each month, it's important to recognize how the timing impacts the total amount drawn.
Concept of Time Value
- Each monthly drawing affects the capital of the business.
- Drawings made at the beginning of the month are effectively available for the entire month, while those made later in the month are available for a shorter period.
Calculation of Effective Time
1. Drawings Timeline:
- If a drawing is made at the beginning of each month, the first drawing is in the account for 7 months, the second for 6 months, the third for 5 months, and so on.
2. Total Months Calculation:
- Each month's drawing can be thought of as having a different time span in the year:
- Month 1: 7 months
- Month 2: 6 months
- Month 3: 5 months
- Month 4: 4 months
- Month 5: 3 months
- Month 6: 2 months
- Month 7: 1 month
3. Average Time Calculation:
- To find the average time, sum the months (7 + 6 + 5 + 4 + 3 + 2 + 1) which equals 28 months.
- Divide this by the number of drawings (7), leading to an average of 4 months.
4. Adjusting for Timing:
- However, since the drawings are made at the beginning of each month, we add half a month to account for the timing difference, resulting in an effective average time of 4 + 0.5 = 4.5 months.
Conclusion
- The correct answer is determined by the method of calculating the average time for the drawings, giving a total of 6.5 months when considering the timing of the drawings made at the start of each month.
This calculation illustrates the importance of timing in financial management and how it impacts the overall outcome.
When calculating the time value of equal monthly drawings made at the beginning of each month, it's important to recognize how the timing impacts the total amount drawn.
Concept of Time Value
- Each monthly drawing affects the capital of the business.
- Drawings made at the beginning of the month are effectively available for the entire month, while those made later in the month are available for a shorter period.
Calculation of Effective Time
1. Drawings Timeline:
- If a drawing is made at the beginning of each month, the first drawing is in the account for 7 months, the second for 6 months, the third for 5 months, and so on.
2. Total Months Calculation:
- Each month's drawing can be thought of as having a different time span in the year:
- Month 1: 7 months
- Month 2: 6 months
- Month 3: 5 months
- Month 4: 4 months
- Month 5: 3 months
- Month 6: 2 months
- Month 7: 1 month
3. Average Time Calculation:
- To find the average time, sum the months (7 + 6 + 5 + 4 + 3 + 2 + 1) which equals 28 months.
- Divide this by the number of drawings (7), leading to an average of 4 months.
4. Adjusting for Timing:
- However, since the drawings are made at the beginning of each month, we add half a month to account for the timing difference, resulting in an effective average time of 4 + 0.5 = 4.5 months.
Conclusion
- The correct answer is determined by the method of calculating the average time for the drawings, giving a total of 6.5 months when considering the timing of the drawings made at the start of each month.
This calculation illustrates the importance of timing in financial management and how it impacts the overall outcome.
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What time would be taken into consideration if equal monthly amount is drawn as drawings at the beginning of each month?a)7 months.b)6 months.c)5 months.d)6.5 months.Correct answer is option 'D'. Can you explain this answer?
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