The following budget estimates have been prepared by Transatlantic Corporation:

Cash Receipts Cash Payments

May 120,000 150,000

June 110,300 150,000

The Company like to maintain a minimum cash balance of $40,000. Any excess cash is invested in a money

market account earning 9% and computed monthly. Interest is re-invested in the money market account. Any cash

deficiencies are covered by a withdrawal from the money market account. If the additional cash is needed, the

Company has a line of credit at 12% interest with the local bank, interest is paid monthly.

Assume a cash balance on May 1 of $40,000 a money market account balance of $0, and a credit line balance of $0.