Mayfair Fashions Has a $90,000 Line of Credit from the Bank

question 119

Short Answer

Mayfair Fashions has a $90,000 line of credit from the Bank of Montreal. Interest at prime plus 2% is deducted from Mayfair's chequing account on the 24^th of each month. Mayfair initially drew down $40,000 on March 8 and another $15,000 on April 2. On June 5, $25,000 of principal was repaid. If the prime rate was 3.25% on March 8 and rose by 0.25% effective May 13, what were the first four interest deductions charged to the store's account?

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Definitions:

Unrealized Intercompany Profits

Profits that arise from transactions between entities within the same group, not yet realized until sold to an external party.

Tax Rate

The percentage at which an individual or corporation is taxed, which can vary based on income levels, jurisdictions, and types of taxes.

Cash

The most liquid form of financial assets, readily available for transactions.

Consolidated Balance Sheet

A balance sheet that combines the assets, liabilities, and equity of a parent company with those of its subsidiaries, removing intercompany transactions.