Buster's had a beginning cash balance of $2,780 for the quarter.During the quarter,the firm had cash collections of $41,309,wages and other cash expenses of $18,800,payments on account of $21,308,and dividends paid of $1,200.The beginning short-term debt is $6,800 with a quarterly interest rate of 2 percent.The firm just adopted a new policy which sets the minimum cash balance at $600.At quarter end,the cumulative surplus (deficit)is ________ and the ending short-term debt is ________.

Question

Quizplus · Accepted Answer

Quarterly interest on debt = 0.02 × $6,800 = $136
Funds available for debt repayment = $2,780 + $41,309 − $18,800 − $21,308 − $1,200 − $136 − $600 = $2,045
Cumulative surplus (deficit)= $2,780 + $41,309 − $18,800 − $21,308 − $1,200 − $136 − $2,045 − $600 = $0
Ending short-term debt = $6,800 − $2,045 = $4,755

Buster's Had a Beginning Cash Balance of $2,780 for the Quarter.During