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Mott Company has a line of credit with Bay Bank. Mott can borrow up to $570,000 at any time over the course of the calendar year. The following table shows the prime rate expressed as an annual percentage along with the amounts borrowed and repaid during the year. Mott 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, Mott pays 8 percent (7 percent + 1 percent) annual interest on $75,000 for the month of January.

Month	Amount Borrowed or (Repaid)						Prime Rate for the Month, %
January		$	75,000					7
February			57,000					7
March			(50,000	)				8
April through October	No change						No change
November			(36,000	)				8
December			(22,000	)				7

Mott earned $42,000 of cash revenue during the year.

2. Prepare an income statement, balance sheet, and statement of cash flows for the year.

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Income Statement

Balance Sheet

Stmt of Cash Flows

Prepare the income statement for the year. (Round intermediate calculations and final answers to nearest whole dollar amount.)

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