Question

Foyert Corp. requires a minimum $7,900 cash balance. If necessary, loans are taken to meet this requirement at a cost of 2% interest per month (paid monthly). Any excess cash is used to repay loans at month-end. The cash balance on October 1 is $7,900 and the company has an outstanding loan of $3,900. Forecasted cash receipts (other than for loans received) and forecasted cash payments (other than for loan or interest payments) follow. October November December Cash receipts $ 23,900 $ 17,900 $ 21,900 Cash disbursements 26,850 16,900 14,100 Prepare a cash budget for October, November, and December. (Negative balance and Loan repayment amount should be indicated with minus sign.)

Answer 1

Answer:

                                           Foyert Corp.

                                          Cash Balance

                                                   October         November       December

Beginning balance                     $7,900           $7,900              $7,900

Outstanding loan 2%                 $3,900           $6,928              $6,066.56

Cash receipts                           $23,900          $17,900            $21,900

Cash disbursements               $26,850          $16,900             $14,100

Interest payments                           $78                $138.56             $121.33

Ending balance                          $4,872             $8,761.44       $15,778.67

Required new loan                    $3,028              -$861.44       -$6,066.56

Final cash balance                   $7,900            $7,900             $9,512.11

At the end of the year, the company will have $0 loans and $9,512.11 in cash.