Question

Problem 14-23 (Static) Cash budget LO 7 The monthly cash budgets for the second quarter of 2019 follow ($000 omitted) for Forest Hills Mfg.Co. A minimum cash balance of $30,000 is required to start each month, and a $100,000 line of credit has been arranged with a local bank at a 8% interest rate. Required: Calculate the missing amounts. (Hint. The total cash available includes collections from customers for all three months, plus the beginning cash balance from April 1, 2019.) (Enter your answers in thousands. (i.e., 20,000 should be entered as 20). Use 360 days a year for calculations.) May June April $ 261 Total $ 26 108 | $ 94 $ 166 $ 338 $ 60 $ 48 Cash balance, beginning Add collections from customers Total cash available Less disbursements: Purchase of inventory Operating expenses Capital additions Payment of dividends Total disbursements Excess (deficiency) of cash available over disbursements Borrowings Repayments (including interest) Cash balance, ending | $ 108 $ 82 $ 304 $ (20) $ 84 $ 30 $ 33

Answer 1

	April	May	June	Total
Beginning cash balance	$                                 26	$                               30	$                                            30	$                                        26
Add; collections from customers	$94-$26 = $68	$                             108	$166-$30 = $136	$68+$108+$136 = $312
Total Cash Available	$                                 94	$30+$108 = $138	$                                          166	$                                     338
Less: Disbursments
Purchase of inventory	$114-$30-$34 = $50	$                               60	$                                            48	$50+$60+$48 = $158
Operating expense	$                                 30	$108-$60-$8 = $40	$82-$48-$2-$8 = $24	$24+$40+$30 = $94
Capital addition	$                                 34	$                                 8	$44-$8-$34 = $2	$                                        44
Payment of dividends	$                                    -	$                                  -	$                                              8	$                                          8
Total Disbursments	$94+$20 = $114	$                             108	$                                            82	$                                     304
Excess (Deficiency) of cash available	$                               (20)	$138-$108 = $30	$                                            84	$338-$304 = $34
Borrowings	$30-$20 = $50	$                                  -	$                                               -	$                                        50
Repayments (Including interest)	$                                    -	$                                  -	50+($50*8%*3/12) = $51	$                                        51
Ending cash balance	$50-$20 = $30	$                               30	$84-$51 = $33	$                                        33

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