Question

Erica Whitman, a college junior, normally prides herself on keeping control of her finances. But the fall semester was a disaster. She contracted West Nile virus and was very sick for months. It was an effort just to keep up with her classes, let alone balance her checkbook. Because she had to quit her part-time job, she knew her checking account balance was getting a little low, but she didn’t quite realize how low until she got a bank notice indicating that she had bounced several checks. The returned checks are as follows: Written to: Purpose Bank Action Valley Electric Authority $80.32 Electric bill Paid Corner Market $94.28 Groceries Returned check Hot Wok Cafe $12.54 Take-out Chinese Returned check Johnny's Pizza $17.68 Pizza Returned check Account Balance -$84.77

Assuming that each retailer (but not the electric company) charges Erica a penalty of $20 and her bank charges $35 for each overdraft, how much will this cash management mistake cost Erica in total? $ $165- correct.

How much does Erica need to deposit in the account to have enough to make good on all her bills plus pay her penalties? (Round answer to 2 decimal places, e.g. 52.75.)

Answer 1

Hi

As we can observe, 3 checks have been returned.

And the total amount to be deposited will be total of overdrawn balance plus the penalties charged by bank and the retailer.

Cost of cash management mistake - No of checks returned Penalty Charged by each retailed $ Bank charges Total penalty 3.00 20.00 35.00 165.00 $ $ Account Balance Total penalty Amount to be deposited (84.77) 165.00 249.77

With formulae-

Cost of cash management mistake - No of checks returned Penalty Charged by each retailed Bank charges Total penalty =SUM(C4:C5)*C3 Account Balance Total penalty Amount to be deposited -84.77 =C6 =C9-C8

Hope this helps!