Epandulo Ltd is a supermarket brand with a financial year ending 31st December. The company’s budgeted information relating to their cash budget for the year 2022 is as follows:
| Q1 | Q2 | Q3 | Q4 | |
| Opening Balance | 5,000 | |||
| Account Receivable collections | 100,000 | 120,000 | 140,000 | 170,000 |
| Payments | ||||
| Materials | 25,000 | 34,000 | 40,000 | 50,000 |
| Labour | 45,000 | 44,000 | 50,000 | 60,000 |
| Overheads | 30,000 | 25,000 | 25,000 | 20,000 |
| Purchase of Equipment | 50,000 |
Epandulo Ltd depreciates their assets in the month following the sale at 10%, using the straight-line method. The owner of the organization introduced a policy of maintaining a minimum cash balance of N$10,000.
To ensure that the company’s debt to asset ratio remains favourable, Epandulo only borrows when necessary and has a goal to pay back borrowed funds as quickly as possible, as much as they can in multiples of 1,000. The company has a 15% open line of credit with a local bank, which allows for interest to be calculated and paid when the principal amount is paid.
Borrowed cash is received at the beginning of the quarter, while repayments are done at the end of the quarter.
Required: Calculate the interest amount paid in quarter 2
1 Answer