Chapter 22, Problem E22.30E

Preparing the financial budget-cash budget

Harley Company requires a minimum cash balance of $5,000. When the company expects a cash deficiency, it borrows the exact amount required on the first of the month. Expected excess cash is used to repay any amounts owned. Interest owned from the previous month’s principal balance is paid on the first of the month at 12% per year. The company has already completed the budgeting process for the first quarter for cash receipts and cash payments for all expenses excepts interest. Harley does not have any outstanding debt on January 1. Complete the cash budget for the first quarter for Harley Company. Round interest expense to the nearest whole dollar.