Arnold Brown has a Visa Card with an annual percentage rate of 19.2%. The unpaid balance for his June billing cycle is $1,147.56. During the billing cycle hepurchased a printer cartridge for $47.78, books for $281.37 and gasoline for $16.65. He made a payment of $1,200. If the account applies the unpaid balance method,what are the finance charge and the new balance?The finance charge is $. The new balance is $(Round to the nearest cent as needed.)

Monthly Interest Rate=Annual Interest RateNo. of periods in a year=19.2%12=1.6% a) Finance…

Answered: Arnold Brown has a Visa Card with an…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Arnold Brown has a Visa Card with an annual percentage rate of 19.2%. The unpaid balance for his June billing cycle is $1,147.56. During the billing cycle he
purchased a printer cartridge for $47.78, books for $281.37 and gasoline for $16.65. He made a payment of $1,200. If the account applies the unpaid balance method,
what are the finance charge and the new balance?
The finance charge is $. The new balance is $
(Round to the nearest cent as needed.)

Expert Solution

Step 1

$\begin{array}{rcl} M o n t h l y I n t e r e s t R a t e & = & \frac{A n n u a l I n t e r e s t R a t e}{N o . o f p e r i o d s i n a y e a r} \\ = & \frac{19.2 %}{12} \\ = & 1.6 % \end{array}$

$\begin{array}{rcl} a) F i n a n c e C h a r g e & = & U n p a i d B a l a n c e a t t h e b e g i n n i n g o f m o n t h \times M o n t h l y i n t e r e s t r a t e \\ = & $ 1, 147.56 \times 0.016 \\ = & $ 18.36 \end{array}$

$\begin{array}{rcl} b) N e w B a l a n c e a t t h e e n d o f t h e m o n t h & = & U n p a i d B a l a n c e a t t h e b e g i n n i n g o f m o n t h + F i n a n c e C h a r g e + P u r c h a s e p r i c e o f P r i n t e r C a r t r i d g e + P u r c h a s e P r i c e o f B o o k s + P u r c h a s e p r i c e o f G a s o l i n e - P a y m e n t m a d e \\ = & $ 1, 147.56 + $ 18.36 + $ 47.78 + $ 281.37 + $ 16.65 - $ 1, 200 \\ = & $ 311.72 \end{array}$

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