John Johnson has been working on Swifty Paints' cash budget forthe coming year. Based on his projections for March, the beginningcash balance will be $45,700; cash collections will be $600,000;and cash disbursements will be $634,000. Swifty Paints desires tomaintain a $43,000 minimum cash balance. The company has a 6% openline of credit with its bank, which provides short-term borrowingsin $500 increments. All borrowings are made at the beginning of themonth, and all repayments are made at the end of the month (in $500increments). When partial payments are made against the line ofcredit, accrued interest applicable to the full amount due throughthat date is paid along with the partial principalrepayment.
| (a) | How much will Swifty Paints need to borrow from the bank at thebeginning of March? |
| | Swifty Paints should borrow | | $enter the amount the companyshould borrow in dollars | |
|
| (b) | Swifty anticipates having a positive $20,000 net cash flow fromApril activities. How much of the line of credit from March can berepaid? How much interest will be repaid in April? |
| | Principal to be repaid | | $enter the principal to berepaid in dollars | | | Interest to be repaid | | $enter the interest to be repaidin dollars |
|
