The following schedule shows the excess of cash receipts over cash disbursements projected for the Zoptic Company for 20X1:

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 20X1

Transcribed Image Text:

Q1 Q4 Q2 Q3 Year Excess (deficiency) of cash available over disbursements $(123,300) $(41,680) $127,780 $42,300 $5,100