Question

Time Remaining 1 hour 5 minutes 30 seconds

01:05:30

Item 14

Item 14

Time Remaining 1 hour 5 minutes 30 seconds

01:05:30

The Arkansas Company makes and sells a product called Product K. Each unit of Product K sells for $42 and has a unit variable cost of $20. The company has the following budgeted data for November:

• Sales of $1,332,200, all in cash.
• A cash balance on November 1 of $67,800.
• Cash disbursements (other than interest) during November of $1,340,000.
• A minimum cash balance on November 30 of $98,000.

If necessary, the company will borrow cash from a bank. The borrowing will be in multiples of $1,000 and will bear interest at 2% per month. All borrowing will take place at the beginning of the month. The November interest will be paid in cash during November.
The amount of cash needed to be borrowed on November 1 to cover all cash disbursements and to obtain the desired November 30 cash balance is: (Round up your answer to nearest multiple of $1,000.)

Answer 1

Cash Balance on 1st November	67,800
Sales	1,332,200
Cash Disbursement	-1,340,000
Closing Cash	60,000
Required Closing Cash	98,000
Bank Loan (Before Interest)	38,000	(98,000-60,000)
Bank Loan (After Interest)	38,776	(38,000 / 98%)
Bank Loan (After Interest) round off	39,000
Cash Balance on 1st November	67,800
Sales	1,332,200
Cash Disbursement	-1,340,000
Bank Loan	39,000
Interest Payment	-780	(38,776 x 2%)
Cash Balance on 30th November	98,220
Cash Balance on 30th November (round off)	98,000