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This problem requires calculating the finance charge using the average daily balance method. Here’s how we can approach it step-by-step:

### Given Information:
- Starting balance (on August 1st): $320
- Annual interest rate: 18%
- Billing period: August (31 days)
- The transactions:
  - August 4: Payment of $78
  - August 15: Charge of $130
  - August 16: Charge of $23
  - August 19: Charge of $32

### Steps:
1. **Daily balances for each period**: We need to determine the daily balances for the various periods, then compute the average daily balance.

2. **Periods**: We can break the month of August into sections based on the transaction dates:
   - August 1–3: Initial balance of $320
   - August 4–14: Balance after a payment of $78 ($320 - $78 = $242)
   - August 15: Balance after charging $130 ($242 + $130 = $372)
   - August 16–18: Balance after charging $23 ($372 + $23 = $395)
   - August 19–31: Balance after charging $32 ($395 + $32 = $427)

3. **Calculate number of days for each balance**:
   - $320 from August 1 to 3 (3 days)
   - $242 from August 4 to 14 (11 days)
   - $372 on August 15 (1 day)
   - $395 from August 16 to 18 (3 days)
   - $427 from August 19 to 31 (13 days)

4. **Compute the average daily balance**:
   The average daily balance is the sum of all the balances multiplied by the number of days they were held, divided by the total number of days in the month.
   \[
   \text{Average Daily Balance} = \frac{(320 \times 3) + (242 \times 11) + (372 \times 1) + (395 \times 3) + (427 \times 13)}{31}
   \]

5. **Calculate finance charge**:
   The monthly interest rate is calculated from the annual rate. Since the annual rate is 18%, the monthly rate is:
   \[
   \text{Monthly Interest Rate} = \frac{18\%}{12} = 1.5\%
   \]
   The finance charge is the average daily balance multiplied by the monthly interest rate.

Let me calculate each of these values.

#### Step-by-step calculation:
- $ 320 \times 3 = 960 $
- $ 242 \times 11 = 2662 $
- $ 372 \times 1 = 372 $
- $ 395 \times 3 = 1185 $
- $ 427 \times 13 = 5551 $

Now, summing these:
\[
960 + 2662 + 372 + 1185 + 5551 = 10730
\]

Average daily balance:
\[
\frac{10730}{31} = 346.13
\]

#### Finance charge:
\[
\text{Finance Charge} = 346.13 \times 1.5\% = 346.13 \times 0.015 = 5.19
\]

### Final Answer:
The finance charge for the month of August is **$5.19**.

Let me know if you need any further explanation or details on the steps.

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Here are 5 related questions you can explore:
1. How does the finance charge change if the interest rate is different?
2. What would the finance charge be if the payment was made later in the month?
3. How does the average daily balance method compare to other methods of calculating finance charges?
4. What if the transaction amounts were reversed, how would that affect the average balance?
5. How can understanding finance charges help with managing credit card debt?

**Tip**: Always keep track of your credit card transactions to better understand how finance charges are calculated and to avoid unexpected costs.

Use the average daily balance method to compute the finance charge on the credit card account for the month of August (31 days). The starting balance from the previous month is $320. The transactions are as follows: August 4: Made payment of $78, August 15: Charged $130 for hiking boots, August 16: Charged $23 for gasoline, August 19: Charged $32 for a restaurant meal. Assume an annual interest rate of 18% on the account, and that the billing date is August 1st.

This page explains how to calculate the finance charge on a credit card using the average daily balance method for a month with various transactions. Learn the step-by-step process of finding the average daily balance and applying the interest rate to compute the finance charge.

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