Question
Bill's Appliance Store offers the following credit terms: The finance charge is based upon the net balance if payment is made within 25 days of
Bill's Appliance Store offers the following credit terms: "The finance charge is based upon the net balance if payment is made within 25 days of the billing date. If payment is made after 25 days, then the finance charge is based on the previous balance. Net balance equals previous balance less payments, returns and credits. In either case, the monthly interest rate is 1.25% on the first $750 of the net balance and 0.75% on any amount over $750."
Compute the net balance, the finance charge, and the new balance for the customer shown below. Assume that the payment was made within the 25-day period.
Previous | Returns/ | Net | Finance | New | |||
Balance | Payments | Credits | Balance | Charge | Purchases | Balance | |
$1,724.19 | $ 975.00 | $348.77 | _______ | _______ | $ 807.45 | _______ |
Group of answer choices
Net balance: $400.42; Finance charge: $0; New balance: $1,207.87
Net balance: $400.42; Finance charge: $3.00; New balance: $1,210.87
Net balance: $400.42; Finance charge: $5.01; New balance: $1,212.88
Net balance: $1,207.87; Finance charge: $12.81; New balance: $1,220.68
Step by Step Solution
There are 3 Steps involved in it
Step: 1
To compute the net balance we need to subtract the payments returns and credits from the previous balance Net balance Previous balance Payments ReturnsCredits 172419 97500 34877 40042 Since the payment ...Get Instant Access to Expert-Tailored Solutions
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Step: 2
Step: 3
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