Tom Jones has a revolving credit account with an annual percentage rate of 18%. Tom's balance at the end of July was $728.15. The activity for the month was recorded: August 10, a purchase of $136.19 August 15, a payment of $292 August 23, a purchase of $386.78. The billing date is the first day of the month and the billing cycle is the number of days in that month. Determine the average daily balance for August? Round to the nearest cent.

$776.96

Step-by-step explanation:

The computation of the average daily balance for August is shown below:

Particulars              Days         Days end balance   Total balance

                                                                                    for the period

                              (A)                   (B)                        (A × B)

Aug 1 to Aug 9         9            $728.15                     $6,533.35

Aug 10 to Aug 14     5            $864.15                     $4,321.70

                                      ($728.15 + $136.19)

Aug 15 to Aug 22    8           $572.34                     $4,578.72

                                     ($864.15 - $136.19)

Aug 23 to Aug 31    9           $959.12                      $8,632.08

                                    ($572.34 + $386.78)

Total                       31                                              $24,085.85

Now the average daily balance is

= $24,085.85 ÷ 31 days

= $776.96

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