Question

Required information The following information applies to the questions displayed below Mott Company has a line of credit with Bay Bank. Mott can borrow up to $470,000 at any time over the Course of the 2018 calendar year The following table shows the prime rate expressed as an annual percentage along with the amounts borrowed and repaid during 2018. Mott agreed to pay interest at an annual rate equal to 1 percent above the banks imerate. Funds are borrowed or repeld on the first day of each month. Interest is payable in cash on the last day of the month. The Interest rates applied to the outstanding monthly balance. For example, Mott Days 6 percent 5 percent + 1 percent annual Interest on $67000 for the month of January Prime Rate for the Month, Month January February March April through October November December Amount Borrowed or (Repaid) $ 67,000 54,000 (37.000) No change (30,000) 117.000) No change Mott earned $32,000 of cash revenue during 2018. Required a. Organize the information in accounts under an accounting equation. (Round your answers to the nearest whole dollar amount. Enter any decreases to account balances with a minus sign. If there is no effect on the Accounts Titles for Retained Earnings, leave the cell blank.) MOTT COMPANY Effect of Events on the Accounting Equation 2018 Assets Assets Liabilities. Stockholder Accounts Titles Liabilities Equity Retained Event Note Retained Earnings Cash payable Earnings January Februar Februar March March April May June July August Septemder October November November December December Revenud < Prey 56 of 8 Next >

Answer 1

Calculation of Interest Expense Month Amount Borrowed (Repaid) 67000 54000 - 37000 Balance at the Interest Rate t Expense End of Month (A) Per Month (B) (A*B) 67000 0.005 335 121000 0.005 605 84000 0.006 490 84000 0.006 490 84000 0.006 490 84000 0.006 490 84000 0.006 490 84000 0.006 490 84000 0.006 490 84000 0.006 490 54000 0.006 315 37000 0.005 185 January February March April May June July August September October November December O O O -30000 -17000 Total Interest expense

MOTT COMPANY Effects of Events on the Accounting Equation 2018 Event Assets Liabilities + Stockholder's Equity Retained Earnings Account Titles / Retained Earnings Cash Notes Payable 67000 -335 Interest expense 54000 67000 -335 54000 -605 -37000 -490 -490 -605 Interest expense - 37000 -490 January January February February March March April May June July August September October November November December December Revenue Balance -490 -490 -490 -490 Interest expense -490 Interest expense -490 Interest expense -490 Interest expense -490 Interest expense -490 Interest expense -490 Interest expense -490 Interest expense -490 -30000 -315 Interest expense -490 -30000 -315 -17000 -185 32000 63640 -17000 78 -185 Interest expense 32000 Revenue 26640 79 37000 80

MOTT COMPANY Income Statement For the Year ended December 31, 2018 Revenue Expenses Interest expense Net Income 32000 5360 26640