Question

Chap 20 Homework Seved Karim Corp. requires a minimum $9,300 cash balance. Loans taken to meet this requirement cost 2% interest per month (paid monthly). Any excess cash is used to repay loans at month-end. The cash balance on July 1 is $9,700, and the company has no outstanding loans. Forecasted cash receipts (other than for loans received) and forecasted cash payments (other than for loan or Interest payments) follow 33.33 points Cash receipts Cash payments July $25,300 29,95€ August $33,300 31,300 September $41,300 33,300 Skipped Prepare a cash budget for July August, and September. (Negative balances and Loan repayment amounts (if any) should be indicated with minus sign. Round your final answers to the nearest whole dollar.) eBook Hint Print KARIM CORP. Cash Budget For July, August, and September July August $ 9.700 References September Beginning cash balance Total cash available Preliminary cash balance Ending cash balance Loan balance - Beginning of month Loan balance s of

Answer 1

Ans:

KARIM CORP
CASH BUDGET
FOR JULY, AUGUST AND SEPTEMBER
	JULY $	AUGUST $	SEPTEMBER $
Beginning cash balance	9,700	9,300	9,300
Cash receipts	+25,300	+33,300	+41,300
TOTAL CASH AVAILABLE	35,000	42,600	50,600
Cash payments	-29,950	-31,300	-33,300
Interest expense	0	-85	-47
PRELIMINARY CASH BALANCE	5,050	11,215	17,253
Additional loan/(Loan repayment)	+4,250	-1,915	-2,335
ENDING CASH BALANCE	9,300	9,300	14,918
LOAN BALANCE
Loan balance- Beginning of month	0	4,250	2,335
Additional loan/(Loan repayment)	+4,250	-1,915	-2,335
Loan balance- End of month	4,250	2,335	0

Workings:

July loan = 9,300-5,050 = 4,250

August interest expense = 4,250 * 2% = 85

August loan repayment = 11,215-9,300 = 1,915

August loan balance = 4,250-1,915 = 2,335

September interest expense = 2,335 * 2% = 47

September cash balance is enough to repay the complete loan amount.

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