Edgar Tilley, the president of Hellock Corporation, has been working with his controller to manage the company's cash position. The controller provided Edgar the following data:

Balance of accounts receivable, June 30.......................$ 30,000

Balance of line of credit, June 30........................................0

Budgeted cash sales for July......................................42,500

Budgeted credit sales for July...................................180,000

Budgeted cash payments for July...............................210,000

The company typically collects 75 percent of credit sales in the month of sale and the remainder in the month following the sale. Tilley's line of credit enables the company to borrow funds readily, with the stipulation that any borrowing must take place on the last day of the month. The company pays its vendors on the last day of the month also. Mr. Tilley likes to maintain a $10,000 cash balance before any interest payments. The annual interest rate is 12 percent.

Required

a. Compute the amount of funds Mr. Tilley needs to borrow on July 31.

b. Determine the amount of interest expense the company will report on the July pro forma income statement.

c. Determine the amount of interest expense the company will report on the August pro forma income statement.