Use the Average Daily Balance Method to Compute the Amount

question 29

Multiple Choice

Use the average daily balance method to compute the amount of interest that will be charged at the end of the billing cycle. Use a 365-day year.
-Month: February (28 days) Previous month's balance: $1240 Interest rate: 22%

• A)$15.96
• B)$19.71
• C)$18.22
• D)$8.31

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Definitions:

Adjusting Entry

Journal entries made at the end of an accounting period to allocate income and expenditure to the period in which they actually occurred.

Straight-Line Method

A process for figuring out depreciation or amortization by spreading the asset’s price evenly over its operational life.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life, reflecting the decline in its value over time.

Gain or Loss

The financial result of selling an asset for more or less than its purchase price, respectively.