Chapter 7: Charge Accounts and Credit Cards Section 7-1: Account Statements “Students can calculate the new balance on a charge account. Warm up exercises 7-1 -—-page 260 #6-14 Evens — Practice exercises —-ws 7-4 Section 7-2: Finance Charge: Unpaid-Balance Method “Students can find the finance charge by using the unpaid-balance method. Warm up exercises 7-2 page 263. #6-18 Evens Practice exercises ~7-2 Section 7-3: Finance Charge: Average Daily-Balance Method (No New Purchases included) “Students can calculate the finance charge based on the average-daily-balance method where no new purchases ore included, __— Warm up exercises 7-3 ~--page 266 #8-12 Evens Section 7-4: Finance Charge: Average-Daily-Balance Method (New Purchases Included) “Students can compute the finance charge based on the average-daily-balance method where new purchases are included, Warm up exercises 7-4 —-page 271 #12-18 Evens Practice exercises—ws 7-3/7-4 Chapter Review —-page 274 #6-20 all Chapter 7 TestStudent Date Class Instructor SECTION 7 | Account Statements ‘When you have a credit card or charge account, you receive a monthly statement. The statement lists all trans- actions that were processed by the closing date for that month. If your previous bill was not paid in full by the closing date, a finance charge is added. The finance charge is interest that is charged for delaying payment. New _ Previous | Finance New Balance “ Balance * Charge * Purchases = (Payments + Credits) 1, What is the new balance for the credit statement shown? Billing Previous Finance Payments New New Date Balance Charge & Credits | Purchases Balance 10/01/-~ $139.50 $2.32 $45.00 529.38 2. What is the new balance for the credit statement shown? Billing | Previous Finance | Payments New New Date Balance Charge & Credits | Purchases Balance 12M -~ $185.74 $2.71 s7oo4 | $49.80 3. You received this monthly statement from Bank Card. What is your new balance? Billing Previous Finance Payments New New Date Balance Charge & Credits | Purchases | Balance 09/22/-— $374.06 36.55 $1000 | s144.99 4. Complete the account statement, Previous balance of $716.45; payments of $150 and $75; new purchases ‘of $29.98, $129.90, and $10.46; finance charge of $12.54. Billing i Finance Payments New New Date Balance Charge & Credits | Purchases Balance 02/01/-— 5. Complete the account statement, Previous balance of $78.80; payment of $78.80; new purchases of $24.60 and $54.98; no finance charge. Billing Previous] finance | Payments New New Date Balance Charge & Credits Purchases Balance o4jo1/-— | 6 Complete the account statement. Previous balance of $410.91; payments of $150 and $150; rerurn credit of $21.90; new purchases of $71.80, $21.90, $116.60, $10.49, $51.80, and 86.75; finance charge of $7.19. Billing Previous Finance Payments | New New Date Balance Charge | _& Credits Purchases | Balance 06/01/- — | Copyright © Glancoa/MeGraw-Hill Mathomati with Business Applications Section 7-1 47Date Student Class Instructor SECTION 7-2 Finance Charge—Unpaid-Balance Method Some companies use the unpaid-balance method of computing Snance charges. This fs when they compute the foance charge based on that portion ofthe previous balance that you have not paid. Unpaid Balance = Previous Balance — (Payments + Credits) Finance Charge = Periodic Rate x Unpaid Balance New _ Previous , Finance New Balance = Balance * Charge ~ Purchases ~ (Payments + Credits) Complete the account statements below using the unpaid-balance method. 1. Rosie Lane has a charge account at the Cosmopolitan Department Store where the periodic rate is 1-58 percent. A portion of her account statement is shown, Billing Previous Finance | Payments New | New Date Balance Charge & Credits | Purchases Balance 05/20/-- $194.06 $61.50 | 2. You have a charge account with e periodic rate of 2.08 percent. Your monthly statement shows purchases totaling $416.49 and a payment of $750. Billing Previous Finance Payments New New Date Balance Charge | & Credits | Purchases Balance o2/01/-= 3981.35 ‘The periodic rate s 2.0 percent; previous balance i $291.84 payment of $200; new purchases of $17.49, $17.70, and $46.04. Billing Previous Finance Payments New ” New Date Balance Charge & Credits | Purchases Balance 07/01/-— | | [8 Mathematics with Business Applications # Section 7 ‘Copyright @ Glencoe!MeGraw:; student Date Class Instructor Finance Charge— SECTIONS 3, 7 4 Average: ally Balance Method ‘Many companies calculate the Finance charge using the average-daly balan method, The average daily ature is the average of the account balance at the end of each day ofthe billing period. New purchases posted during the biling period may or may not be included when figuring the ‘balance at the end of the day. The finance charge is calculated by multiplying the periodic rate by the average daily balance. = Sum of Daily Balances ‘Number of Months Finance Charge = Periodic Rate x Average Daily Balance “= Unpaid Balance + Finance Charge + New Purchases Average Daily Balanc New Balance | 1. Fillin the table below. Billing End-of-day Number ‘Sum of | - Periods Payment Balance | _of Days Balances 09/01-9/10 $410.20 | 10 $4,102.00 09/11 $150.00 260.20 1 260.20 |__o92-9/30_| 260.20 19 | TOTALS | A portion of your ac What is the average daily balance without new purchases? 2. Compute the average daity balance, finance charge, and new balance as of July 1 using the average-daily-balance tnethod where no new purchases are included. The periodic rate is 14 percent. count statement for November from Cha Transaction Balance Payment, Purchase ‘Amount $800.00 200.00 150.00 xge-All Credit Company is shown. The Feance charge is computed using the average-daily-balance method where new purchases are included. | Find the average daily balance, the finance charge, ‘and the new balance. ] POSTING [TRANSACTION] puRCHASeS | PAYMENTS | i |_nererence | DATE DATE. | DESCRIPTION | & ADVANCES | _& CREDITS 003763 we PAYRENT 45.00 oa7uu4 3/2 ars [corner Drug Co-| _ #33+78 BILLING | PREVIOUS | PERIODIC ‘AVERAGE DAILY | FINANCE PERIOD BALANCE RATE BALANCE | __CHARGE 3/05- 4/04 3-3 | 2.0% a PAYMENTS & | PURCHASES & NeW MINIMUM PAYMENT | CREDITS ‘ADVANCES BALANCE PAYMENT DUE $45.00 $31.75 aren Gopyrignt © GlencoelttcGraw-Hill ic rainernatics with Business Applications # Sections 7