Question

From the personal transactions below of Jane Simpson, please calculate the average daily balance. Ms. Simpson calculates that the average daily balance should be $877.67. Is she correct? Whether she’s right or not show all calculations. If she’s not correct, then what did she do wrong in her calculations?

(Hint: I’m not asking you to calculate finance charge or total owed. All you need do is tell me if the average daily balance that Jane calculated is correct or incorrect, and tell me why)

28-Day Billing Cycle
3/18	Billing Date	Previous Balance		$800
3/24	Payment		$60 credit
3/29	Sears Charge		$250
4/5	Payment		$20 credit
4/9	Macy’s Charge		$200

Answer 1

28 Days billing cycle
(a) Date range	(b) Description	(c ) $	(d) Cumulative $	(e )Days to maintain Balance	(f=d*e) Product $
From 18th March to 23rd March	Prev. Balanace	800	800	6	4,800
From 24th March to 28th March	Payment Cr.	-60	740	5	3,700
From 29th March to 4th April	Sears Charge	250	990	7	6,930
From 5th April to 8th April	Payment Cr.	-20	970	4	3,880
From 9th April to 14th April	Macy's Charge	200	1170	6	7,020
Total	28	26,330
So Average Daily Balance = Product/Total days
Average Daily Balance = 26,330/28
Average Daily Balance = $ 940.35
Wrong calculation done by Ms. Simpson due to product amount devided by 30 days instead of
28 days which is actual day billing cycle. As she calculated (26,330/30) =$ =26330/30.