On March 2, 2016, ACC 211 signed an agreement for a line of credit with the UIS
ID: 2598566 • Letter: O
Question
On March 2, 2016, ACC 211 signed an agreement for a line of credit with the UIS Bank. Under the agreement, ACC 211 can borrow up to $50,000 at any time during the following year. ACC 211 will make any borrowings or repayments on the first day of a month and make interest payments on the last day of any month when a balance exists. The annual interest rate will be the bank's prime rate plus 2% and will be applied to the outstanding monthly balance. The following table gives the appropriate information for April, May, and June:
Month Amount borrowed or (repaid) Prime rate
April 15,000 4.5%
May 20,000 4%
June (25,000) 5%
Record all necessary journal entries (issuance, payment and interest) on the dates indicated in the table. Round figures to the nearest dollar
Explanation / Answer
Date
Particulars
Debit($)
Credit($)
01/04/2016
Bank A/c ------ Dr
To, Cash credit from UIS Bank
(Being amount borrowed from bank)
15,000
15,000
30/04/2016
Interest A/c ------------Dr (15,000*6.5%)/12
To, bank A/c
(Being interest paid @6.5% p.a. for 1 month on $15,000)
81
81
01/05/2016
Bank A/c ------ Dr
To, Cash credit from UIS Bank
(Being amount borrowed from bank)
20,000
20,000
31/05/2016
Interest A/c ------------Dr (35,000*6%)/12
To, bank A/c
(Being interest paid @6% p.a. for 1 month on $35,000)
175
175
01/06/2016
Cash credit from UIS Bank A/c ------ Dr
To, Bank A/c
(Being amount borrowed from bank)
25,000
25,000
30/06/2016
Interest A/c ------------Dr (10,000*7%)/12
To, bank A/c
(Being interest paid @6% p.a. for 1 month on $10,000)
58
58
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Date
Particulars
Debit($)
Credit($)
01/04/2016
Bank A/c ------ Dr
To, Cash credit from UIS Bank
(Being amount borrowed from bank)
15,000
15,000
30/04/2016
Interest A/c ------------Dr (15,000*6.5%)/12
To, bank A/c
(Being interest paid @6.5% p.a. for 1 month on $15,000)
81
81
01/05/2016
Bank A/c ------ Dr
To, Cash credit from UIS Bank
(Being amount borrowed from bank)
20,000
20,000
31/05/2016
Interest A/c ------------Dr (35,000*6%)/12
To, bank A/c
(Being interest paid @6% p.a. for 1 month on $35,000)
175
175
01/06/2016
Cash credit from UIS Bank A/c ------ Dr
To, Bank A/c
(Being amount borrowed from bank)
25,000
25,000
30/06/2016
Interest A/c ------------Dr (10,000*7%)/12
To, bank A/c
(Being interest paid @6% p.a. for 1 month on $10,000)
58
58
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