FOR

QUESTIONS  38 TO 40, REFER TO THE

FOLLOWING INFORMATION:

Exotic Spices Ltd is a holding company that sells a

variety of spices in South Africa. The company has three subsidiaries, one in

Limpopo Province, the second in Gauteng Province, and the third in KZN Province,

with its headquarters in Midrand. Each of its subsidiaries has an individual

bank account with different banks, and each subsidiary can finance its deficits

with an overdraft facility at a rate of 7% and invest the surplus cash, which

will earn the company a 4% interest.

The subsidiaries’ bank accounts reflect the following

balances:

Limpopo subsidiary, a debit balance of R500 000.

Gauteng subsidiary, a credit balance of R400 00000.

KZN subsidiary, a debit balance of -R200 000.

The

Master account has a debit balance R400 000

Required:

You are required to answer questions 39 to 40 after

preparing two schedules: The first one must indicate what will happen with the

bank balances of each subsidiary if the holding company in Midrand decides not

to pool cash from the three subsidiaries to a central master account, and the

second schedule must reflect the net results of physical cash sweeping to the

central master account.

QUESTION 38

Suppose Exotic Spice Ltd does not

arrange for cash pooling, and every subsidiary handles its cash separately with

its own bank. The net or combined interest amount payable/earned by the three

subsidiaries equals…

a.   

b.   

c.    

d.