Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The following schedule shows the excess of cash receipts over cash disbursements projected for the Zeena Company for 2 0 2 1 : Excess (

The following schedule shows the excess of cash receipts over cash disbursements projected for the Zeena Company for 2021:
Excess (deficiency) of cash available over disbursements
Q1
Q2
Q3
Q4
Year
$(127,300)
$(45,680)
$131,780
$131,780
$46,300
$5,100
The company borrows and repays from an open line of credit in round $100 amounts. Loan related payments are made in periods when cash is available with interest paid on only the portion of any principal being repaid. The current balance (principal plus accrued interest) in the line of credit account is $2,808 for theborrowing 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 $1,180.
Required:
Prepare a cash budget assuming that terms of borrowing require payment of principal after four quarters have elapsed since payment of principal after four quarters have elapsed since receiving a loan, and that interest is accrued until then and repaid along with the principal. What interest expense and interest payable will be reported on the income statement for the year? Any borrowing will take place at the beginning of a quarter, and any repayments will be made at the end of a quarter. (Any "Repayments", "Interest" and "Deficiency of cash" should be indicated by a minus sign.)
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing And Assurance Services An Integrated Approach

Authors: Alvin Arens

13th Edition

0136084737, 9780136084730

More Books

Students also viewed these Accounting questions

Question

How does your message use nonverbal communication?

Answered: 1 week ago

Question

What reactive strategies might you develop?

Answered: 1 week ago