Boyd Company has a line of credit with State Bank. Boyd can borrow up to $520,000 at any time over the course of the Year 1 calendar year. The following table shows the prime rate expressed as an annual percentage along with the amounts borrowed and repaid during Year 1. Boyd 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, Boyd pays 6 percent (5 percent + 1 percent) annual interest on $72,000 for the month of January. Month Amount Borrowed or (Repaid) Prime Rate for the Month January $ 72,000 5% February 52,000 5 March (46,000) 6 April through October No change No change November (36,000) 6 December (22,000) 5 Boyd earned $37,000 of cash revenue during Year 1. Required Prepare an income statement, balance sheetand statement of cash flows for Year 1.
Boyd Company has a line of credit with State Bank. Boyd can borrow up to $520,000 at any time over the course of the Year 1 calendar year. The following table shows the prime rate expressed as an annual percentage along with the amounts borrowed and repaid during Year 1. Boyd 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, Boyd pays 6 percent (5 percent + 1 percent) annual interest on $72,000 for the month of January.
| Month | Amount Borrowed or (Repaid) | Prime Rate for the Month |
|---|---|---|
| January | $ 72,000 | 5% |
| February | 52,000 | 5 |
| March | (46,000) | 6 |
| April through October | No change | No change |
| November | (36,000) | 6 |
| December | (22,000) | 5 |
Boyd earned $37,000 of cash revenue during Year 1.
Required
Prepare an income statement, balance sheetand statement of
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