Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Bradley Company has a line of credit with State Bank. Bradley can borrow up to $590,000 at any time over the course of the Year

Bradley Company has a line of credit with State Bank. Bradley can borrow up to $590,000 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 part of Year 1. Bradley 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, Bradley pays 7 percent (6 percent + 1 percent) annual interest on $90,000 for the month of January.

Requirments:

1. Calculate Bradley's interest expense for January, February, and March.

2. What TOTAL amount of cash will Bradley pay related to this line of credit in March Year 1?

3. Record the journal entry for the all FEBRUARY and MARCH line of credit transactions.

image text in transcribed 2 Amount paid by Bradley in March, Year 1

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting

Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso

9th Edition

1118334329, 978-1118334324

More Books

Students also viewed these Accounting questions

Question

' Which areas depend on inputs from you to get their work donel>

Answered: 1 week ago