Question

Colson Company has a line of credit with Federal Bank. Colson can borrow up to $301,500 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 the first four months of 2018. Colson agreed to pay interest at an annual rate equal to 2.50 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, Colson pays 6.50 percent (4.00 percent + 2.50 percent) annual interest on $78,700 for the month of January.

Month	Amount Borrowed or (Repaid)			Prime Rate for the Month
January	$	78,700			4.00	%
February		124,100			3.00
March		(19,300	)		3.50
April		29,600			4.00

Required

Compute the amount of interest that Colson will pay on the line of credit for the first four months of 2018. (Round answers to nearest whole dollar.)

Month

Month	Interest paid
Janurary
Feburary
March
April

Compute the amount of Colson's liability at the end of each of the first four months. (Do not round intermediate calculations. Round your final answers to the nearest whole dollar.)

Month	Balance at end of Month
Janurary
Feburary
March
April

Answer 1

Compute the amount of interest that Colson will pay on the line of credit for the first four months of 2018
Month	Borrow/Repay	Outstanding	Rate of Interest	Amount of Interest
January	$                       78,700.00	$ 78,700.00	6.5	$                 426.29
February	$                     124,100.00	$ 202,800.00	5.5	$                 929.50
March	$                     (19,300.00)	$ 183,500.00	6	$                 917.50
April	$                       29,600.00	$ 213,100.00	6.5	$              1,154.29
Total Interest amount for 4 months is 3428
Interest is calculated on the outstanding amount every month at given rate of interest
For eg: January month interest = 78700*6.5%*1/12 = $426
Liability at end of each month is the outstanding coloum. Interest amount is not included because intrest is paid on last day.
Compute the amount of Colson's liability at the end of each of the first four months. (Do not round intermediate calculations. Round your final answers to the nearest whole dollar.)
Month	Balance at end of Month
Janurary	78700
Feburary	202800
March	183500
April	213100
Explaination :
Janurary	78700
Feburary	78700+124100
March	78700+124100-19300
April	78700+124100-19300+29600