Question

Karim Corp. requires a minimum $10,000 cash balance. Loans taken to meet this requirement cost 1% interest per month (paid monthly). Any excess cash is used to repay loans at month-end. The cash balance on July 1 is $10,400, 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.

	July			August			September
Cash receipts	$	26,000		$	34,000		$	42,000
Cash payments		31,000			32,000			34,000

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.)

Call receipts Cash payments $26,000 $34,000 31,000 32,000 $ 42,000 34,000 Prepare a cash budget for July, August, and September. (Negative bolances and Loan repayment amounts indicated with minus sign. Round your final answers to the nearest whole dollar.) KARIM CORP Cash Budget For July, August, and September August $ 10,400 July September Beginning cash balance Total cash available Preliminary cash balance Ending cash balance Loan balance Loan balance - Beginning of month Additional loan (loan repayment) Loan balance - End of month

Answer 1

Correct Answer:

KARIM CORP
Cash Budget
for July, August & September
		July	August	September
Beginning Cash Balance		$                      10,400	$ 10,000.00	$         10,000
Cash receipts		$                      26,000	$ 34,000.00	$         42,000
Total Cash Available		$                      36,400	$ 44,000.00	$         52,000
Cash payments		$                      31,000	$ 32,000.00	$         34,000
Interest Expense		$                                -	$ 46.00	$            26.46
Preliminary cash balance		$                         5,400	$ 11,954.00	$         17,974
Additional loan (Loan Repayments)		$                         4,600	$ (1,954.00)	$         (2,646)
Ending Cash Balance		$                      10,000	$ 10,000.00	$         15,328
Loan Balance
Loan Balance -Beginning of Month	$                                -		$ 4,600.00	$            2,646
Additional Loan (Loan Repayment)	$                         4,600		$ (1,954.00)	$         (2,646)
Loan Balance End of Month	$                         4,600		$ 2,646.00	$                   -

End of answer.

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