Question
Jim Heston has been working on Austin Paints' cash budget for the coming year. Based on his projections for March, the beginning cash balance will
Jim Heston has been working on Austin Paints' cash budget for the coming year. Based on his projections for March, the beginning cash balance will be $50,110; cash collections will be $700,000; and cash disbursements will be $710,680. Austin Paints desires to maintain a $50,000 minimum cash balance. The company has a 10 percent open line of credit with its bank, which provides short-term borrowings in $500 increments. All borrowings are made at the beginning of the month, and all repayments are made at the end of the month (in $500 increments). Accrued interest is paid at the time of repayment.
Assuming that Austin Paints has $7,000 in excess cash budgeted for April, how much principal will the company plan to repay? How much interest will be repaid in April?
Principal to be repaid?
Interest to be repaid? |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started