Question

Foyert Corp. requires a minimum $7,500 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 October 1 is $7,500 and the company has an outstanding loan of $3,500. Forecasted cash receipts (other than for loans received) and forecasted cash payments (other than for loan or interest payments) follow.

	October			November			December
Cash receipts	$	23,500		$	17,500		$	21,500
Cash payments		26,250			16,500			14,500

Prepare a cash budget for October, November, and December.

Answer 1

Cash budget

	October	November	December
Beg Bal	7500	7500	7500
Cash receipts	23500	17500	21500
Total Cash available	31000	25000	29000
Less: Cash disbursement
Cash payment	-26250	-16500	-14500
Interest expense	-70	-126	-109
Total Cash disbursement	-26320	-16626	-14609
Excess (deficiency)	4680	8374	14391
Borrowing (repayment)	2820	-874	-5446
Ending Balance	7500	7500	8945