Question

At the beginning of the year, BJ's had an outstanding short-term loan of $527. The interest charges for the year were $31 and the annual net cash flow was $211, prior to any payment of principal or interest on the loan. What is the anticipated loan balance at year-end?

a) $558
b) $769
c) $693
d) $347
e) $451

Answer 1

The anticipated loan balance at the end of the year is calculated by adding the interest charges to the initial loan amount and then subtracting the net cash flow. For BJ's, the ending loan balance would be $347.

Step-by-step explanation:

The question is asking us to calculate the anticipated loan balance at the end of the year for BJ's, given the original loan amount, the interest charges for the year, and the net cash flow before any payments have been made on the loan.

To calculate the year-end loan balance, we can follow these steps:

1. Start with the initial outstanding loan amount at the beginning of the year: $527.
2. Add the interest charges for the year to this amount: $527 + $31 = $558.
3. Subtract the net cash flow, which is available to pay off the loan (not considering the interest charge which was calculated in the previous step): $558 - $211 = $347.

Therefore, the anticipated loan balance at the end of the year is $347, which corresponds to option d.