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 $530,000 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 bank's 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, Mott pays 8 percent (7 percent + 1 percent) annual interest on $72,000 for the month of January Prime Rate for the Month, % Month January February March April through October November December Amount Borrowed or (Repaid) $ 72,000 54,000 (48,000) No change (34,000) (23,000) No change Mott earned $38,000 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.)

Answer 1

MOTT COMPANY
Effect of Events on the Accounting Equation 2018
Event	Assets	=	Liabilities	+	Stockholders' Equity	Accounts Titles/ Retained Earnings	Interest Caclculations
	Cash	=	Note Payable	+	Retained Earnings
January	72000	=	72000	+	0
January	-480	=	0	+	-480	Interest expense	[8% x $72000 x 1/12]
February	54000	=	54000	+	0
February	-840	=	0	+	-840	Interest expense	[8% x ($72000 + $54000) x 1/12]
March	-48000	=	-48000	+	0
March	-585	=	0	+	-585	Interest expense	[9% x ($72000 + $54000 - $48000) x 1/12]
April	-585	=	0	+	-585	Interest expense	[9% x $78000 x 1/12]
May	-585	=	0	+	-585	Interest expense	[9% x $78000 x 1/12]
June	-585	=	0	+	-585	Interest expense	[9% x $78000 x 1/12]
July	-585	=	0	+	-585	Interest expense	[9% x $78000 x 1/12]
August	-585	=	0	+	-585	Interest expense	[9% x $78000 x 1/12]
September	-585	=	0	+	-585	Interest expense	[9% x $78000 x 1/12]
October	-585	=	0	+	-585	Interest expense	[9% x $78000 x 1/12]
November	-34000	=	-34000	+	0
November	-330	=	0	+	-330	Interest expense	[9% x ($78000 - $34000) x 1/12]
December	-23000	=	-23000	+	0
December	-140	=	0	+	-140	Interest expense	[8% x ($44000 - $23000) x 1/12]
Revenue	38000	=	0	+	38000	Revenue
Bal.	52530	=	21000	+	31530