Nancy Billows bought a $7,000 desk at Furniture. Based on her income, Nancy could only afford to pay back $700 per month. The charge on the unpaid balance is 3%. The U. S. Rule is used in the calculation. Calculate the balance outstanding at the end of month 2. (Round your answer to the nearest cent.)

Answer and Explanation:

The computation of the balance outstanding at the end of the month 2 is shown below:

Month   Due balance  Interest  Monthly     Balance        Oustanding

                                                     payment    Reduction     Balance

1            $7,000           $210         $700          $490              $6,510

                         ($7,000 × 3%)                  ($700 - $210)  ($7,000 - $490)

2           $6,510            $195.30    $700          $504.70        $6,005.30

                          ($6,510 × 3%)        ($700 - $195.30)  ($6,510 - $504.70)

statement of owner's equity;