Interest payments occur on the last date

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Reference no: EM13940305

Royal Industries has budgeted the following information for January.

Cash Receipts 40,000
Beginning cash bal. 10,000
Cash payments 48,000
Desired Ending Cash Cushion 5,000

If there is a cash shortage, the company borrows money. If a surplus occurs funds are used to repay loans or to invest in short-term assets. All borrowing, repayments, and interest payments occur on the last date of the month. The interest rate is 1% per month. The amount of interest expense incurred for January is

a. 20

b. 30

c. 50

d. none of the above

Reference no: EM13940305

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