Question

Karim Corp. requires a minimum $9,300 cash balance. Loans taken to meet this requirement cost 2% interest per month (paid monthly). Any excess cash is used to repay loans at month-end. The cash balance on July 1 is $9,700, 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 $25,300 29,950 August $33,300 31,300 September $41,300 33,300 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.)

Answer 1

--Requirement: Cash Budget

	Jul	Aug	Sept
Beginning Cash balance	$9,700	$9,700	$9,700
Cash receipts	$25,300	$33,300	$41,300
Total Cash available	$35,000	$43,000	$51,000
Cash Disbursements	$29,950	$31,300	$33,300
Interest Expense	$0	$93 [4650 x 2%]	$55 [2743 x 2%]
Preliminary Cash balance	$5,050	$11,607	$17,645
Additional loan (loan repayment)	$4,650	($1,907)	($2,743)
Ending Cash balance	$9,700	$9,700	$14,902
Loan balance
Loan Balance - Beginning	$0	$4,650	$2,743
Additional loan (loan repayment)	$4,650	($1,907)	($2,743)
Loan Balance - Ending	$4,650	$2,743	$0