Question

On March 28, 2018, Low Rider Automotive established a line of credit at its bank, with interest at 13.5% p.a. This line of credit was used to purchase $4000 of inventory and supplies. Low Rider paid $4044.37 to satisfy the incurred debt. On what date did Low Rider Automotive honour the line of credit?

Answer 1

Low Rider Automotive honored the line of credit on March 28, 2018, the same date it was established.

Step-by-step explanation:

To determine the date on which Low Rider Automotive honored the line of credit, we need to calculate the amount of interest incurred on the debt. The interest incurred can be calculated by subtracting the amount paid to satisfy the debt from the initial debt amount. Interest Incurred = Debt Amount - Amount Paid. In this case, the debt amount is $4000 and the amount paid is $4044.37. So, the interest incurred is $4000 - $4044.37 = -$44.37.

Since the interest incurred is negative, it means that Low Rider Automotive paid off the debt early, before any interest accrued. Therefore, we can conclude that Low Rider Automotive honored the line of credit on March 28, 2018, the same date it was established.