Answer:
Widmer's Cash Budget for January, February, and March
January:
Opening Balance - $15,000
Cash Receipts - $30,000
Less Payments - $38,500
Difference - $6,500
Loan - $8,500
Closing Balance - $15,000
February:
Opening Balance - $15,000
Cash Receipts - $87,000
Less Payments - $85,000
Less Interest on loan -$85
Difference - $16,915
Loan Repayment- $1,915
Closing Balance - $15,000
March:
Opening Balance - $15,000
Cash Receipts - $85,000
Less Payments - $65,000
Less Interest on loan -$65.85
Difference - $34,934.15
Loan Repayment- $6,585
Closing Balance - $28,349.15
Explanation:
In January, $6,500 cash balance necessitated the taking of a loan of $8,500 in order to bring it to $15,000 required minimum.
In February, 1% interest was paid on $8,500 loan. This gives $85. Part of the loan ($1,915) was repaid to maintain the cash balance at $15,000.
In March, the interest on loan was 1% on $6,585 $(8,500 -1,915) or the loan balance. This gives $65.85 as interest paid. The loan balance was also repaid because of the excess cash balance.
