Colson Company has a line of credit with Federal Bank. Colson can borrow up to $375,000 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 2.00 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 5.75 percent (3.75 percent + 2.00 percent) annual interest on $83,300 for the month of January. Month Amount Borrowedor (Repaid) Prime Rate forthe Month January $ 83,300 3.75 % February 117,700 2.75 March (19,400 ) 3.25 April 28,100 3.75 calculate the interest amount for the four months
Colson Company has a line of credit with Federal Bank. Colson can borrow up to $375,000 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 2.00 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 5.75 percent (3.75 percent + 2.00 percent) annual interest on $83,300 for the month of January. Month Amount Borrowedor (Repaid) Prime Rate forthe Month January $ 83,300 3.75 % February 117,700 2.75 March (19,400 ) 3.25 April 28,100 3.75 calculate the interest amount for the four months
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Colson Company has a line of credit with Federal Bank. Colson can borrow up to $375,000 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 2.00 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 5.75 percent (3.75 percent + 2.00 percent) annual interest on $83,300 for the month of January.
| Month | Amount Borrowed or (Repaid) |
Prime Rate for the Month |
||||
| January | $ | 83,300 | 3.75 | % | ||
| February | 117,700 | 2.75 | ||||
| March | (19,400 | ) | 3.25 | |||
| April | 28,100 | 3.75 | ||||
calculate the interest amount for the four months
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education