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O'Reilly, Inc. has prepared its third quarter budget and provided the following data:JulAugSepCash ...

O'Reilly, Inc. has prepared its third quarter budget and provided the following data:

   Jul   Aug   Sep
Cash collections   $51,000   $39,700   $47,900
Cash payments:
Purchases of direct materials   30,000   21,900   17,000
Operating expenses   12,200   8,100   11,300
Capital expenditures   13,400   24,700   0

The cash balance on June 30 is projected to be $4,500. The company has to maintain a minimum cash balance of $5,000 and is authorized to borrow at the end of each month to make up any shortfalls. It may borrow in increments of $5,000 and has to pay interest every month at an annual rate of 4%. All financing transactions are assumed to take place at the end of the month. The loan balance should be repaid in increments of $5,000 whenever there is surplus cash. Calculate the amount of principal repayment at the end of September.
A) $10,000
B) $20,000
C) $5,000
D) $15,000

Textbook

Horngren's Financial & Managerial Accounting, The Financial Chapters

Edition: 5^th

Authors: Miller-Nobles, Mattison, Matsumura

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