Boyd Company has a line of credit with State Bank. Boyd can borrow up to $480,000 at any time over the course of the Year 1 calendar year. The following table shows the prime rate expressed as an annual percentage along with the amounts borrowed and repaid during Year 1. Boyd agreed to pay interest at an annual rate equal to 1 percent above the banks 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, Boyd pays 7 percent (6 percent + 1 percent) annual interest on $72,000 for the month of January.

Boyd Company has a line of credit with State Bank. Boyd can borrow up to $480,000 at any time over the course of the Year 1 calendar year. The following table shows the prime rate expressed as an annual percentage along with the amounts borrowed and repaid during Year 1. Boyd 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, Boyd pays 7 percent (6 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 (42,000) No change (30.000) (18,000) No change Boyd earned $33,000 of cash revenue during Year 1. BOYD COMPANY Income Statement For the Year Ended December 31, Year 1 Service revenue $ 33,000 Expenses Interest expense Net income $ $ 33,000 BOYD COMPANY Balance Sheet As of December 31, Year 1 Assets Cash $ Total Assets Liabilities Stockholders' Equity Common stock Retained earnings Total Stockholders' Equity Total Liabilities and Stockholders' Equity 26,816 26,816 $ BOYD COMPANY Statements of Cash Flows For the Year Ended December 31, Year 1 Cash flows from operating activities: Net cash flow from operating activities Cash flows from investing activities Cash flows from financing activities: Net cash flow from financing activities Net change in cash Ending cash balance