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The Jazz Co
The Jazz Co. is working on its cash budget for November. The budgeted beginning cash balance is $24,000. Budgeted cash receipts total $177,000 and budgeted cash disbursements total $167,000. The desired ending cash balance is $50,000. If financing is needed to reach the desired goal, the company can borrow at the rate of 2% simple interest per month but must repay loan and principle at the end of the chosen month.
Tab :1 Prepare a cash budget. Show your work if you want partial credit. Total points: 12
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26B. Assume that the Jazz Co. has available cash in excess of expected needs in the month of December and plans to repay amount --principle and interest by December 31 using simple interest.
Tab: 2 Calculate the total amount repaid to the bank.
Expert Solution
a) Cash Budget:
| Description | Amount$ |
| Budgeted beginning cash balance | 24,000.00 |
| Add: Budgeted Receipts | 177,000.00 |
| Less: Budgeted disbursements | 167,000.00 |
| Budgeted closing cash balance | 34,000.00 |
| Less: Desired closing cash balance | 50,000.00 |
| Deficiency of cash available over disbursements | 16,000.00 |
b) Computation of Total Amount repaid to the Bank:
Deficiency of cash available over disbursements or Loan Amount = $16,000
Interest Rate = 2%
Total Amount repaid to Bank = Principal + Interest
= $16,000 + ($16,000*2%*1/12)
= $16,000 + $26.67
Total Amount repaid to Bank = $16,026.67 or $16,027
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