Credit Management Calculation Help

rebecca2

Hi everyone, could anybody give me a pointer on how to calculate the answer to question 1.3 (b) on the second practise assessment on MyAAT?

'Small companies are eligible to charge interest to customers who settle their debts late. The interest rate is calculated as 8% above base rate and is charged on the gross amount of the debt due (VAT inclusive at 20%)'
(b) What is the interest chargeable on a net debt of £3000 which is 60 days late when the base rate is 1%?

The correct answer is £53.26.

The gross amount would be £3600 but I am unsure which calculation I would need to use to achieve the answer?

Thanks all x

Louise89

Hi Rebecca

So the interest rate is 8+1 = 9% for the year.

The interest is applicable to the gross amount;

So your gross amount x the percent for the year...

3600 x 9% = 324

So you must then divide by 365 and multiply by how many days they are overdue, which in this case is 60.

324 x 60/365 = 53.26

Hope this helps x

rebecca2

Hi Louise,

Thank you so much! It was the dividing by 365 which I was missing! Massive help for me, thank you :001_smile:x

rebecca2

Hi Louise,

Thank you so much! It was the dividing by 365 which I was missing! Massive help for me, thank you :001_smile:x

Louise89

Glad I could be of help! Try and think of it all as days as most of the calcs in CRMC are multiplied by 365. It was still fresh in my mind from class yesterday