Using the Rule of 78, Find the Amount of Unearned

question 20

Multiple Choice

Using the Rule of 78, find the amount of unearned interest for the loan paid in full before the date of maturity. Round to the nearest cent.
-Finance charge: $397
Total number of payments: 28
Remaining number of payments, when paid in full: 5

• A)$14.67
• B)$10.50
• C)$15.75
• D)$9.78

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Definitions:

Capital Deficiency

A situation where a company's liabilities exceed its assets, indicating that it does not have enough capital to meet its financial obligations.

Credit Balances

Represent amounts owed to creditors or customers, typically seen in liability, equity, and revenue accounts.

Income Sharing

An arrangement where income is distributed among participants or stakeholders based on predetermined criteria, often found in partnerships, cooperatives, and certain employment agreements.

Equity Purchase

The act of buying ownership interest in a company, typically through the acquisition of shares, giving the purchaser a stake in the company's profits and assets.