Question

Foyert Corp. requires a minimum $6,800 cash balance. If necessary, loans are taken to meet this requirement at a cost of 1% interest per month (paid monthly). Any excess cash is used to repay loans at month-end. The cash balance on October 1 is $6,800 and the company has an outstanding loan of $2,800. 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 $22,800 $16,800 $20,800
Cash payments 25,200 15, 800 15,200
Prepare a cash budget for October, November, and December.

Answer 1

Answer&Explanation

            october november december

beginning 6,800 6,800       6,800

receipts         2,800 16,800      20,800

payment      -25,200 -15,800      -15,200

interest            -28 -252.28 -244.8028 (beginning finance x 1%)

pre-finance       -15,628      7,548        12,155

minimun           6,800      6,800 6,800

Finance  

beginning     2,800   25,228       24,480

payment/loan    22,428 -748 -5,355 (pre-finance - minimun)

ending            25,228     24,480 19,125

 

ending cash 6,800 6,800 6,800  (pre-finance + loan/repayment)