Question

Colson Company has a line of credit with Federal Bank Colson can borrow up to $301,500 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 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, Colson pays 775 percent (4.25 percent +3.50 percent) annual interest on $79,400 for the month of January. Amount Borrowed or (Repaid) Month January February March April Prime Rate for the Month 4.252 3.25 121,900 (22,500) 28.600 4.25 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.) Month Interest Paid January February March b. Compute the amount of Colson's liability at the end of each of the first four months. (Do not round intermediate calculations Round your final answers to the nearest whole dollar.) Month Balance End of Month January

Answer 1

a)	Month	Interest paid
	January	$                    513
	Feburary	$                    686
	March	$                        -	No interest is paid by bank
	April	$                    185
b)	Month	Balance at end of month
	January	$               79,913
	Feburary	$             122,586
	March	$             (22,500)
	April	$               28,785