Picture 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 1st. the amount of interest paid on july 1 would be: $250. $400. $221. $290.

Excess cash available = 2000

Total funding required = 5000

Amount of interest paid = 50

Explanation:

Determine the amount of interest paid in February:

First calculate the shortage/excess of funds by deducting the cash payments from the sum of beginning cash balance and the cash receipts as below:

Excess cash available = Beginning cash balance + Cash receipts – Cash payments

Excess cash available = 10,000 + 40,000 – 48,000

Excess cash available = 50,000 – 48,000

Excess cash available = 2000

Next, calculate the total funding required by deducting the excess cash available from the desired ending cash balance as below:

Total funding required = Desired ending cash balance - Excess cash available

Total funding required = 7000 – 2000

Total funding required = 5000

Finally, calculate the amount of interest paid in February by applying the rate of interest of 1 % on the total funding required as below:  

Amount of interest paid = Total funding require × Rate of interest  

Amount of interest paid = 5000 × 1%  

Amount of interest paid = 50

answer; burned it;