Kenneth Clark has been working on Concord Paints' cash budget
for the coming year. Based on his projections for March, the
beginning cash balance will be $40,700; cash collections will be
$560,000; and cash disbursements will be $594,000. Concord Paints
desires to maintain a $41,000 minimum cash balance. The company has
a 12% 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). When partial payments are made
against the line of credit, accrued interest applicable to the full
amount due through that date is paid along with the partial
principal repayment.
| (a) |
How much will Concord Paints need to borrow from the bank at
the beginning of March? |
|
|
Concord Paints should
borrow |
|
$enter the amount the company
should borrow in dollars |
|
|
| (b) |
Concord anticipates having a positive $20,000 net cash flow
from April activities. How much of the line of credit from March
can be repaid? How much interest will be repaid in April? |
|
|
Principal to be repaid |
|
$enter the principal to be
repaid in dollars |
|
|
Interest to be repaid |
|
$enter the interest to be repaid
in dollars |
|