Duncan Developments Ltd

question 105

Short Answer

Duncan Developments Ltd. obtained a $120,000 line of credit from its bank to subdivide a parcel of land it owned into four residential lots and to install water, sewer, and underground electrical services. Amounts advanced from time to time are payable on demand to its bank. Interest at prime plus 4% on the daily principal balance is charged to the developer's bank account on the 26^th of each month. The developer must apply at least $30,000 from the proceeds of the sale of each lot against the loan principal. Duncan drew down $50,000 on June 3, $40,000 on June 30, and $25,000 on July 17. Two lots quickly sold, and Duncan repaid $30,000 on July 31 and $35,000 on August 18. The initial prime rate of 5% changed to 5.25% effective July 5 and 5.5% effective July 26. Prepare a repayment schedule showing loan activity and interest charges up to and including the interest payment on August 26.

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Definitions:

Ledger

A comprehensive collection of a company's financial accounts, including assets, liabilities, equity, revenue, and expenses.

Management

The method of coordinating, arranging, guiding, and managing resources to fulfill organizational objectives.

Trial Balance

A trial balance is a bookkeeping report that lists the balances in each of an organization's general ledger accounts in a specific moment in time, typically at the end of an accounting period.

Mathematical Equality

A statement indicating that two mathematical expressions or quantities are identical in value.