Cheyenne Company Has Budgeted the Following Information for June If There Is a Cash Shortage, the Company Borrows Money

question 42

Multiple Choice

Cheyenne Company has budgeted the following information for June: $\begin{array}{llr} \text { Cash receipts } &\$271,000\\ \text {Beginning cash balance } &5,000\\ \text { Cash payments } &280,000\\ \text { Desired ending cash balance } &25,000\end{array}$
If there is a cash shortage, the company borrows money from the bank. All cash is borrowed at the beginning of the month in $1,000 increments, and interest is paid monthly at 1% on the first day of the following month. The company had no debt before June 1. The amount of interest paid on July 1 would be:

• A) $250.
• B) $400.
• C) $221.
• D) $290.

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