Answer:
Adjusted Balance Method:
Interest $__3.90____
New Balance $__568.90____
Explanation:
a) Data and Calculations:
Previous balance = $500
Purchases:
May 12 $25
May 22 100
May 30 50
Total $175
Payment:
May 20 $110
Interest = $3.90 ($500 - $110)
New Balance $ = Adjusted balance + New Purchases + Interest
= $390 + $175 + $3.90
= $568.90
b) Based on the credit card information and using the adjusted balance method, you compute the finance charge (or interest) based on the previous balance of $500 from the end of the last billing cycle and subtract any payments and credits of $110 made during the current billing cycle. This simply means that the new charges (purchases on the credit card) of $175made during the billing cycle are not factored into the adjusted balance before calculating interest.
