Nicholas Company obtained an $80,000 line of credit from the Bank on January 1,

Question

Nicholas Company obtained an $80,000 line of credit from the Bank on January 1, 2008. The company agreed to accept a variable interest rate that was set at 2% above the bank's prime lending rate. The bank's prime rate of interest and the amounts borrowed or repaid during the first three months of 2008 are shown in the following table. Assume that the company borrows or repays on the first day of each month. Borrowing is shown as a positive amount and repayments are shown as negative amounts indicated by parentheses.

Based on this information alone, the amount of interest expense (rounded) recognized in March would be:
a. $116.
b. $131.
c. $146.
d. $204.

Explanation / Answer

B.

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