On January 1, Year 1, Niagara Corporation arranges a $6,000…
On January 1, Year 1, Niagara Corporation arranges a $6,000 line of credit with Centennial Bank. It accepted the bank’s offer of 1% above the prime rate with interest payments on December 31 of each year. All borrowings and repayments are to take place on January 1 of each year.Niagara begins its loan transactions with Centennial Bank by borrowing $2,000 on January 1, Year 1. Niagara records the first year’s interest payment on December 31, Year 1. Centennial’s prime rate is 4% for Year 1. Which of the following shows the effect of this event on the financial statements? Balance SheetIncome StatementStatement of Cash FlowsAssets=Liabilities+Stockholders’ EquityRevenue−Expense=Net IncomeA.(100)= +(100) −100=(100)(100) OAB.(100)=(100)+ − = (100) FAC.(80)=(80)+ − = (80) FAD.(80)= +(80) −80=(80)(80) OA
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