Colson Company has a line of credit with Federal Bank. Colson can borrow up to $407,000 at any time over the course of the Year 1calendar year. The following table shows the prime rate expressed as an annual percentage, along with the amounts borrowed andrepaid during the first four months of Year 1. Colson agreed to pay Interest at an annual rate equal to 2.00 percent above the bank'sprime 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. Theinterest rate is applied to the outstanding monthly balance. For example, Colson pays 6.25 percent (4.25 percent - 2.00 percent)annual Interest on $83,300 for the month of January.MonthJanuaryFebruaryMonthJanuaryFebruaryMarchAprilMarchAprilRequired:a. Compute the amount of Interest that Colson will pay on the line of credit for the first four months of Year 1.Note: Do not round intermediate calculations. Round your final answers to the nearest whole dollar.Amount Borrowedor (Repaid)Month$ 83,300115,600(18,000)34,500JanuaryFebruaryMarchAprilInterest Paidb. Compute the amount of Colson's liability at the end of each of the first four months.Note: Round your final answers to the nearest whole dollar.Prime Ratefor theMonth4.25%3.253.754.25Balance End ofMonth< Prevwwwwwwwww3 of 10#Next

The line of credit allows the borrowers to withdraw money at any time which has a preset borrowing…

a. Compute the amount of Interest that Colson will pay on the line of credit for the first four months of Year 1. Note: Do not round Intermediate calculations. Round your final answers to the nearest whole dollar.

a. Compute the amount of Interest that Colson will pay on the line of credit for the first four months of Year 1. Note: Do not round Intermediate calculations. Round your final answers to the nearest whole dollar.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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