Mott Company has a line of credit with Bay Bank Mott can bor

Mott Company has a line of credit with Bay Bank. Mott can borrow up to $400,000 at any time over the course of the 2018 calendar year. The following table shows the prime rate expressed as an annual percentage along with the amounts borrowed and repaid during 2018. Mott 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, Mott pays 6 percent (5 percent + 1 percent) annual interest on $60,000 for the month of January.

Mott earned $25,000 of cash revenue during 2018.

Required

Organize the information in accounts under an accounting equation. (Round your answers to the nearest whole dollar amount. Enter any decreases to account balances with a minus sign. Select \"NA\" if there is no effect on the \"Accounts Titles for Retained Earnings\".)

Month	Amount Borrowed or (Repaid)		Prime Rate for the Month, %
January		$	60,000					5
February			40,000					5
March			(30,000	)				6
April through October	No change		No change
November			(20,000	)				6
December			(10,000	)				5

Solution

nformation in accounts under an accounting equation. Month Event Assets = Liabilities + Stockholders’ Equity Cash = Notes Payable + Retained Earnings Jan Amount Borrowed 60000 60000 Jan Interest Paid (60000*6%/12 -300 -300 Feb Amount Borrowed 40000 40000 Feb Interest Paid(60000+40000)*6%/12 -500 -500 Mar Amount Repaid -30000 -30000 Mar Interest Paid(100000-30000)*7%/12 -408 -408 Apr Interest Paid -408 -408 May Interest Paid -408 -408 June Interest Paid -408 -408 July Interest Paid -408 -408 Aug Interest Paid -408 -408 Sep Interest Paid -408 -408 Oct Interest Paid -408 -408 Nov Amount Repaid -20000 -20000 Nov Interest Paid(70000-20000)*7%/12 -292 -292 Dec Amount Repaid -10000 -10000 Dec Interest Paid(50000-10000)*6%/12 -200 -200 Rev 25000 Bal 35444 40000 20444