Question

Shakira has a balance of $202. 86 in her checking account on Saturday morning. She uses her debit card to pay her cell phone bill of $80. 73 over the phone. She then picks up her dry cleaning, dog food at the pet store and groceries for debits of $16. 89, $35. 24, and $113. 92. Shakira’s bank uses a balance system of deducting highest transactions first. The bank will not return amounts up to a total of $50 in overdrafts, but they do charge a fee for each overdraft. How many overdraft fees will Shakira incur? a. 1 b. 2 c. 3 d. 4.

Answer 1

Overdraft is a facility provided by bank to make expenses more than that of the balance present in the account of customers. This facility is provided to certain specified customers with high credibility.

Given

Balance is $202.86

Note: Payments will be recognized in descending order because it is the policy of bank to record the highest transaction first.

Payments made are :

$113.92

$80.73

$35.24

$16.89

Calculations

$\begin{aligned}\rm Overdraft&= Balance - Payments \\\\ \rm Overdraft&= \ 202.86-\ 113.92-\ 80.73-\ 35.24-\ 16.89\\ \\\rm Overdraft&= \ -43.92\end$

Therefore Shakira will be allowed to overdraw from the account as the amount of overdraft is less than $50.

Elaborating further, When we deduct the payments from the balance in descending order we reach on a conclusion that there will be 2 overdrafts made because after deducting $113.92 and $80.73 from the balance amount of $202.86 there will be 2 payments pending amounting $35.24 and $16.89 from the left balance of $ 8.21.

Therefore the correct option will be OPTION B i.e. 2 overdrafts.

Learn more about overdrafts here:

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