Shim Company

The final amount owed on the account is $44,954.19. The cash revenue earned is a fixed amount so I did not include it in the spreadsheet.
Shim Company has a line of credit with Bay Bank. Shim can borrow up to $200,000 at any time over the course of the 2006 calendar year. The following table shows the prime rate expressed as an annual percentage along with amounts borrowed and repaid during 2006. Shim agreed to pay interest at an annual rate equal to 1 percent above the banks 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, shim pays 5% (4% + 1%) annual interest on $70,000 for the month of January  In addition: “Shim agreed to pay interest at an annual rate equal to 1 percent above the banks prime rate.” So Shim agreed to pay 5% interest even when the bank’s rate was 4%. To get the monthly interest rate from the annual rate, we calculate 0.05/12 = 0.00417 (rounded off)

Month Amount Borrowed Prime rate for
or (repaid) the month %
January $70,000 4
February 40,000 4
March (20,000) 5
April thru October no change no change
November (30,000) 5
December (20,000) 4
Shim earned $18,000 of cash revenie during 2006
A. Organize the information in accounts under an accounting equation.