Answer:
Part 1. $500 required
Part 2. $1,500 required
Explanation:
<u>Part 1.</u>
<u>Northern Auto Parts</u>
<u>Cash Budget</u>
<u>Cash Receipts:</u>
January February
Beginning cash balance 10600 10500
Cash receipts from customers 11300 14700
Cash receipt on note receivable <u> 6500 0 </u>
Cash available 28400 25200
<u></u>
<u>Cash payments:</u>
Purchases of inventory 14400 12200
Selling and administrative expenses <u> 3500 3500 </u>
Total cash payments 17900 15700
Now
$ $
<u>Cash Receipts:</u> 28400 25200
<u>Cash payments:</u> <u> </u><u>17900 15700 </u>
Ending cash balance before financing 10500 9500
<u>Less</u>: Ending cash balance Required <u> 10000 10000 </u>
Projected cash excess 500 -500
Total effects of financing <u> 0 500 </u>
Ending cash balance 10500 10,000
<u></u>
<u></u>
<u>Part 2.</u>
<u>Cash Receipts:</u>
January February
Beginning cash balance 10600 10500
Cash receipts from customers 11300 13700
Cash receipt on note receivable <u> 6500 0 </u>
Cash available 28400 24200
<u></u>
<u>Cash payments:</u>
Purchases of inventory 14400 12200
Selling and administrative expenses <u> 3500 3500 </u>
Total cash payments 17900 15700
Now
$ $
<u>Cash Receipts:</u> 28400 24200
<u>Cash payments:</u> <u> </u><u>17900 15700 </u>
Ending cash balance before financing 10500 8500
<u>Less</u>: Ending cash balance Required <u> 10000 10000 </u>
Projected cash excess 500 -1500
Total effects of financing <u> 0 1500 </u>
Ending cash balance 10500 10,000
The company will have to borrow $1,500 in the month February.
