Acc201 Survey of Accounting: P7-25 Hulse Company has a line of credit with Bay Bank

Acc201 Survey of Accounting
P7-25 Effect of a Line of Credit on Financial Statements
Hulse Company has a line of credit with Bay Bank. Hulse can borrow up to $250,000 at any time over the course of the 2010 calendar year. The following table shows the prime rate expressed as an annual percentage along with the amounts borrowed and repaid during 2010. Hulse agreed pay interest at an annual rate equal to 1 percent above the bank's 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.

a. Organize the information in account under an accounting equation.
b. Prepare an income statement, balance sheet, and statement of cash flows for 2010.
c. Write a memo discussing the advantages to a business of arranging a line of credit.
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