Question

GS Cookie Co. forecasts cash receipts for January and February of $18,000 and $20,000, with cash payments of $6,000 and $8,000, respectively. GS Cookie's cash balance at the beginning of January was $5,000, a level that it attempts to maintain. At the beginning of the year, GS Cookie has a $15,000 balance outstanding on its line of credit at the local bank. Based on its cash budget, how much of the line of credit can GS Cookie repay in January and February combined?

Answer 1

Answer:

It can pay 12,000 on January and the 3,00 left infebruary therefore; it will pay all his credit line within this two months.

Explanation:

                  January         February

beginning cash $  5,000   $    5,000

receipts            $18,000   $  20,000

disbursement    $(6,000)  $   (8,000)

subtotal            $17,000   $   17,000

minimun            $5,000   $    5,000

Financing  

beginning  $15,000    $ 3,000

payment/loan  $(12,000)  $(3,000)

ending             $  3,000          $-

Ending Cash:  $5,000            $14,000