Ferguson Company obtained an $80,000 line of credit from the Metropolitan Bank on January 1, 2013. The company agreed to accept a variable interest rate that was set at 2% above the bank's prime lending rate. The bank's prime rate of interest and the amounts borrowed or repaid during the first three months of 2013 are shown in the following table. Assume that Ferguson borrows or repays on the first day of each month. Borrowing is shown as a positive amount and repayments are shown as negative amounts indicated by parentheses. Based on this information alone, the amount of interest expense recognized for the month of March would be:

Question

Ferguson Company obtained an $80,000 line of credit from the Metropolitan Bank on January 1, 2013. The company agreed to accept a variable interest rate that was set at 2% above the bank's prime lending rate. The bank's prime rate of interest and the amounts borrowed or repaid during the first three months of 2013 are shown in the following table. Assume that Ferguson borrows or repays on the first day of each month. Borrowing is shown as a positive amount and repayments are shown as negative amounts indicated by parentheses.  Based on this information alone, the amount of interest expense recognized for the month of March would be:

Quizplus · Accepted Answer

$35,000 balance x (5% + 2%) x 1/12 = $204

Ferguson Company Obtained an $80,000 Line of Credit from the Metropolitan