Question

Kaiser, Inc. has the following budgeted cash collections from the cash receipts budget and cash payments (excluding loan principal repayments and interest payments) from the cash disbursements budget for the next quarter (April, May, & June).

	Cash Receipts	Cash Payments
April	$30,024	$27,064
May	$32,398	$39,383
June	$36,064	$32,772

In addition, Kaiser's beginning cash balance as of April 1 is $15,290.

Kaiser, Inc. would like to maintain a minimum $15,000 cash balance at all times. In order to achieve this goal Kaiser has negotiated a line of credit with the bank. If the preliminary cash balance falls below $15,000 Kaiser will borrow the necessary funds to keep their balance above the desired amount. If the preliminary cash balance is above the $15,000 minimum balance they will use any excess to pay down any outstanding loan balance at the time. The interest rate on any outstanding line of credit balance is 6% per year. The interest is paid at the end of each month and is computed on the beginning loan balance for the month. They have a zero balance on their line of credit on April 1st.

Answer 1

Answer is given below

Kaiser Inc. Cash Budget For April, May and June April $15,290 $30,024 Beginning cash balance Cash collected May $18,250 $32,398 June $15,000 $36,064 $27,064 $39,383 $32,772 Cash payments Interest on bank loan (6%) Preliminary cash balance Additional loan (repayment) Closing cash balance $18,250 $11,265 $3,735 $15,000 $18,290 -$3,290 $15,000 $18,250 April Loan balance at beginning of the month Additional loan (loan repayment) Loan balance at end of the month May $0 $3,735 $3,735 June $3,735 $3,290 $445