The cash budget was prepared with the following assumptions:

 The Company has borrowed a $200,000 revolving loan on 31 December last year, charging 1% interest per month.

 Borrowing should be made to bring the Company to minimum $20,000 cash balance at each month end.

 Partially loan repayment should be made whenever there is any excess cash. Borrowing and repayment of the loans should be in multiples of $1,000. It is assumed that borrowing occurs at the beginning of the month while loan repayment is made at the end of the month.

Cash Budget   Jan Beginning cash balance              29,000Cash receipts and disbursements:Collections from customers              48,000Payments to suppliers            (45,000)Payments for operating expense            (13,000)Excess (deficiency) of cash before financing              19,000

You are required to calculate the Jan amount of the following IF Interest is paid at every month end.

a) borrowing / repayment;

b) the interest expense (Show Workings

Answer rating: 100% (QA)

To calculate the borrowingrepayment amount and the interest expense for January you can follow these ... View the full answer