The following schedule shows the excess of cash receipts over cash disbursements projected for the Zoptic Company
Question:
The following schedule shows the excess of cash receipts over cash disbursements projected for the Zoptic Company for 2015:
The company borrows and repays from an open line of credit in round $100 amounts. The current balance (principal plus accrued interest) in the line of credit account is $2,392 for the borrowing that occurred in the last quarter of the previous year. The annual interest rate is 16%. A minimum cash reserve of $600 must be maintained each quarter. The opening balance for the year is expected to be $780.
Required:
Prepare a cash budget for each quarter and for the year in total and calculate the annual interest expense on the line of credit that would appear on the budgeted income statement for the year ending 2015.
Cash BudgetA cash budget is an estimation of the cash flows for a business over a specific period of time. These cash inflows and outflows include revenues collected, expenses paid, and loans receipts and payment. Its primary purpose is to provide the... Line of Credit
A line of credit (LOC) is a preset borrowing limit that can be used at any time. The borrower can take money out as needed until the limit is reached, and as money is repaid, it can be borrowed again in the case of an open line of credit. A LOC is...
Step by Step Answer:
a Since 2392 is the balance in the line of credit inclusive of accrued interest at the end of the fourth quarter of the previous year the principal outstanding must be 2392104 2300 In Q3 of the 20X1 a ...View the full answer
Introduction to Managerial Accounting
ISBN: 978-1259103261
4th Canadian edition
Authors: Peter C. Brewer, Ray H Garrison, Eric Noreen, Suresh Kalagnanam, Ganesh Vaidyanathan
