Dr Robillard Obtained a $75,000 Operating Line of Credit at Prime

question 53

Essay

Dr. Robillard obtained a $75,000 operating line of credit at prime plus 1%. Accrued interest up to but not including the last day of the month is deducted from his bank account on the last day of each month. On February 5 (of a non-leap year) he received the first draw of $15,000. He made a payment of $10,000 toward principal on March 15, but took another draw of $7,000 on May 1. Prepare a loan repayment schedule showing the amount of interest charged to his bank account on the last days of February, March, April, and May. Assume that the prime rate remained at 3.5% through to the end of May.

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Definitions:

Total Revenues

The overall amount of income generated from the sale of goods or services before any expenses are subtracted.

Total Costs

The sum of all expenses (fixed and variable) incurred in the production of goods or services.

Long-Run Total Cost

The total cost incurred by a firm when all inputs, including both fixed and variable costs, are fully adjustable.

Long-Run Supply Function

A relationship that shows the quantity of goods a firm is willing and able to produce and supply to the market at different possible prices over a long period, considering all inputs as variable.