### Credit Card Cycle#### Formula:**Beginning balance + interest charged + purchases - minimum payment = Ending balance**The ending balance then becomes the beginning balance for the next monthly cycle.#### Example and Exercise:The starting balance is $300, the yearly interest rate is 24%, the monthly purchase is $450, and the minimum payment is $100. What is the ending balance?#### Solution:\[300 + 2\% \text{ of } 300 + 450 - 100 = 300 + 6 + 450 - 100 = 656\]Now, start a new cycle in which the monthly purchases are only $75 and compute the ending balance.**Note:** The ending balance from the example ($656) is the beginning balance for the exercise.

Beginning balance = 656 Yearly interest = 24 % Monthly interest = 2 % i.e, ( 656 x 2 % = 13.12 )…

Answered: Beginning balance + interest…

Beginning balance + interest charged+purchases- minimum payment Ending balance The ending balance then becomes the beginning balance for the next monthly cycle.

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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Question

### Credit Card Cycle

#### Formula:
**Beginning balance + interest charged + purchases - minimum payment = Ending balance**

The ending balance then becomes the beginning balance for the next monthly cycle.

#### Example and Exercise:
The starting balance is $300, the yearly interest rate is 24%, the monthly purchase is $450, and the minimum payment is $100. What is the ending balance?

#### Solution:
\[
300 + 2\% \text{ of } 300 + 450 - 100 = 300 + 6 + 450 - 100 = 656
\]

Now, start a new cycle in which the monthly purchases are only $75 and compute the ending balance.

**Note:** The ending balance from the example ($656) is the beginning balance for the exercise.

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