Question

oyert Corp. requires a minimum $6,800 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 October 1 is $6,800 and the company has an outstanding loan of $2,800. Forecasted cash receipts (other than for loans received) and forecasted cash payments (other than for oan or interest payments) follow. Cash receipts Cash payments October $22,880 25,200 November $16,899 15,899 December $20,800 15,200 Prepare a cash budget for October, November, and December (Negative balances and Loan repayment amounts (if any) should be indicated with minus sign. Round your final answers to the nearest whole dollar) FOYERT CORP. Cash Budget For October, November, and December October November Beginning cash balance December Total cash available Preliminary cash balance Ending cash balance Loan balance $ 2.800 Loan balance - Beginning of month Additional loan (loan repayment) Loan balance - End of month

Answer 1

Solution Required : Cash Budget FOYERT CORP. Cash Budget For October, November, and December October November December Beginning cash balance $6,800 $6,800 $6,800 Cash receipts $22,800 $16,800 $20,800 Total cash available $29,600 $23,600 $27,600 Cash payments ($25,200) ($15,800) ($15,200) Interest expense ($28) ($52) ($43) Preliminary cash balance $4,372 $7,748 $12,357 Additional loan (loan repayment) $2,428 ($948) ($4,280) Ending cash balance $6,800 $6,800 $8,077 Loan balance Loan balance - Beginning of month Additional loan (loan repayment) Loan balance - End of month $2,800 $2,428 $5,228 $5,228 ($948) $4,280 $4,280 ($4,280) $0 WN-1: Calculation of interest expense Loan balance - Beginning of month Interest expense (1%) $2,800 $28 $5,228 $52 $4,280 $43