Dawkins Company has a line of credit with Federal Bank. Dawkins can borrow up to $500,000 at any time over the course of the 2011 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 2011. Dawkins agreed to pay interest at an annual rate equal to 2 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, Dawkins pays 5 percent (3 percent + 2 percent) annual interest on $80,000 for the month of January. Month January February March April Amount Borrowed or (Repaid) $80,000 60,000 (20,000) 30,000 Prime Rate for the Month,% 3.0 3.5 4.0 4.5 Required Provide all journal entries pertaining to Dawkins's line of credit for the first four months of 2011.

Dawkins Company has a line of credit with Federal Bank. Dawkins can borrow up to $500,000 at any time over the course of the 2011 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 2011. Dawkins agreed to pay interest at an annual rate equal to 2 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, Dawkins pays 5 percent (3 percent + 2 percent) annual interest on $80,000 for the month of January. Month January February March April Amount Borrowed or (Repaid) $80,000 60,000 (20,000) 30,000 Prime Rate for the Month,% 3.0 3.5 4.0 4.5 Required Provide all journal entries pertaining to Dawkins's line of credit for the first four months of 2011.

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter9: Current Liabilities, Contingencies, And The Time Value Of Money

Section: Chapter Questions

Problem 9.6AP

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