Question

GoStream | 123mov... ?Live NBA Streaming. Maintenance Conn. Connect - Sign In The GOAT, Let's gra. ework Saved Help Sove & Exit Check Exercise 7-11 Accounting for a line of credit LO 7-6 Colson Company has a line of credit with Federal Bank Colson can borrow up to $344,000 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 the first four months of 2018. Colson agreed to pay interest at an annual rate equal to 3.50 per prime rate. Funds are borrowed or repaid on the first day of each month. Interest is payable in cash on the last day of the month. The interest rate is applied to the outstanding monthly balance. For example, Colson pays 6.75 percent (3.25 percent. 3.50 percent) annual interest on $81,700 for the month of January Month January February March April Amount Borrowed or (Repaid) $ 81,700 118,100 (17, 100) 33,300 Prime Rate for the Month 3.25% 2.25 2.75 3.25 Required a. Compute the amount of interest that Colson will pay on the line of credit for the first four months of 2018. (Round answers to nearest whole dollar.) < Prey 7 of 12 !! Next >

Answer 1

Answers:-

a. Amount of Interest to be paid:-

Month	Interest Paid
January	460
February	957
March	952
April	1215

b. Liability at the end of each month:-

Month	Balance end of Month
January	81700
February	199800
March	182700
April	216000

Working:-

A	B	C	D	E
		Cumulative of B	Prime Rate for the Month + 3.50%	C * D / 12
Month	Amount Borrowed or (Repaid)	Liability at the end of the Month	Annual Rate of Interest Applicable for the month	Amount of Interest Paid for the Month
January	81700	81700	6.75 %	459.5625 [(81700 * 6.75 / 100) / 12]
February	118100	199800 (81700+118100)	5.75 %	957.375 [(199800 * 5.75 / 100) / 12]
March	(17100)	182700 (199800-17100)	6.25 %	951.5625 [(182700 * 6.25 / 100) / 12]
April	33300	216000 (182700+33300)	6.75 %	1215. [(216000 * 6.75 / 100) / 12]

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