Question

Combine the information in the problem and the chart using the average balance method to solve the problem. The account balance on April 1st is $50.51. On April 15th, a payment of $15.00 is made. What is the average daily balance for the account

Answer 1

To find the average daily balance, multiply the account balance by the number of days before and after a payment, then divide by the total number of days in the period. In this case, the average daily balance for April is $42.51.

Step-by-step explanation:

To calculate the average daily balance for the account, we need to consider the balance before and after the payment on April 15th and the number of days each balance was maintained.

From April 1st to April 14th, there are 14 days during which the account balance was $50.51. On April 15th a payment of $15.00 was made, thus leaving the balance from April 15th to April 30th (16 days) at $35.51 ($50.51 - $15.00).

Step-by-Step Calculation:

Calculate the total balance before the payment:
$50.51 (balance) × 14 (days) = $707.14

Calculate the total balance after the payment:
$35.51 (balance) × 16 (days) = $568.16

Add the totals from steps 1 and 2:
$707.14 + $568.16 = $1275.30

Divide by the total number of days in April to find the average daily balance:
$1275.30 ÷ 30 (days) = $42.51

Therefore, the average daily balance for the account in April is $42.51.

Answer 2

$42.51

Step-by-step explanation:

The daily balance during April 1st to April 14th was $50.51, then from April 15th to April 30th is was 35.51.

average daily balance = [($50.51 x 14 days) + ($35.51 x 16 days)] / 30 days = ($707.14 + $568.16) / 30 days = $42.51

The average daily balance is used to calculate interest charges by adding the debt balance at the end of every day, and then dividing it by the number of days in the month. This method is commonly used by banks that issue credit cards.