Question

Karim Corp. requires a minimum $8,000 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 $8,400, 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. Cash receipts Cash payments July $20,000 28,000 August $26,000 30,000 September $40,000 22,000 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.) KARIM CORP. Cash Budget For July, August, and September July August $ 8,400 September Beginning cash balance Total cash available Preliminary cash balance Ending cash balance Loan balance $ 0 Loan balance - Beginning of month Additional loan (loan repayment) Loan balance - End of month

Answer 1

Cash budget

	July	August	September
Beginning Cash balance	8400	8000	8000
Cash receipt	20000	26000	40000
Total cash available	28400	34000	48000
Cash disbursement	-28000	-30000	-22000
Interest expense	0	-76	-117
Preliminary Cash balance	400	3924	25883
Borrowing	7600	4076	-11676
Ending Cash balance	8000	8000	14207
Loan balance
Loan balance-Beginning of month		7600	11676
Additional loan (loan repayment)	7600	4076	-11676
Loan balance-End of month	7600	11676	0