Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On April 15, 2025, Sage, Inc. opens a line of credit with United Bank. Sage can borrow up to $500,000 at any time over the

On April 15, 2025, Sage, Inc. opens a line of credit with United Bank. Sage can borrow up to $500,000 at any time over the course of the calendar year. Sage agreed to pay interest at an annual rate equal to 2.50 percent above the banks prime rate.

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 2025. 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.

Required:

a. How much interest does Sage pay on May 31, 2025?

b. How much interest does Sage pay on June 30, 2025?

c. How much interest does Sage pay on July 31, 2025?

d. Record the necessary journal entries for the months of April and July, 2025. Note: all entries need to be to 2 decimal places.

Month Amount Borrowed or (Repaid) Prime Rate for the Month
May 80,000 3.50%
June 50,000 3.00%
July (25,000) 3.25%

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_2

Step: 3

blur-text-image_3

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

Economics In Minutes 200 Key Concepts Explained In An Instant

Authors: Niall Kishtainy

1st Edition

1782066470, 9781782066477

More Books

Students also viewed these Accounting questions