Question

3. Assume that you have a credit card whose statement on April 1 showed that owe $1,890.00. You made a payment to the credit card company of $800.00 the same day using on-line payment. Throughout the month of April you cha $485.00 on this card which is posted on the May 1 statement. On May 1 you an on-line payment of $940.00 to the company. Throughout the month of M you charged $260.00 on this card which is posted on June 1. a) Draw a timeline showing this cash flow. b) How much do you owe the credit card company on June 1? Assume th company charges 1% interest per month.

It is for Mechanical engineering. Not Accounting

Answer 1

Answer for (a)....

$1,890 April 1 Total money owned on April 1 Add: Interest at 1% per month [11,890 x 16% 2 18.902 19 7 hatal money owned after interest. Lest payment made on April 1 May 1 Remaining balance teanfred to next month $1909 $800 - $1109 $485 Add Amount Charged on April posted on May 1 Addi- Intrest on $485 at 1% $1599 I Balance as on May 1 payment made on may 1 $940 Less : $659 June 1 Remaining balance desnqued to next month $260 Add Amount chocoged on may tariflerits June Addi- Interest on $260 at 1% 3 qaa on 1 Tune including Total balance as Interest on 1%

Answer for (b)........

(b) As you can see in the above table, the remaining balance transfered from may 1 to june 1 is $659 and the amount charged on may will to transfered to june that is $260 with 1% interest that is $3. So, the final amount owned to the credit card company on june 1 is $ 922.00 . (Refer above table)