Exercise 10-5A on page 567

Singer Company has a line of credit with United Bank. Singer can borrow up to $400,000 at any time to over the course of 2016 calendar year. The following table shows the prime rate expressed as an annual percentage along with the amounts borrowed and repaid during the first three months of 2016. Singer agreed to pay interest at an annual rate equal to 2% 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 applied to the outstanding monthly balance. For example, Singer pays 6.5% (4.5% + 2%) annual interest on $140,000 for the month of February.

Month Amount Borrowed/(Repaid) Prime Rate for the Month

January $80,000 4.0%

February 60,000 4.5

March (20,000) 4.0

Provide all journal entries pertaining to Singers line of credit for the first three months of 2016.