Question

Morneau Company borrowed $200,000 from Citibank at 8% interest. The loan agreement stated that a compensating balance of $25,000 must be kept in the Morneau checking account at Citibank. The total Morneau cash balance at the end of the year was $45,000.
1. How much usable cash did Morneau Company receive for its $200,000 loan?
2. What was the real interest rate paid by Morneau?
3. Prepare a footnote for the annual report of Morneau Company explaining the compensating balance.



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  • CreatedFebruary 20, 2015
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