Question

1. Flounder Corporation’s management wants to maintain a minimum monthly cash balance of $8,960. At the beginning of September, the cash balance is $13,742, expected cash receipts for September are $108,864, and cash disbursements are expected to be $128,800.

How much cash, if any, must Flounder borrow to maintain the desired minimum monthly balance? Determine your answer by using the basic form of the cash budget.

FLOUNDER CORPORATION Cash Budget For September
select an opening cash budget item                                                          Ending cash balanceCash disbursements for SeptemberTotal available cashExcess (deficiency) of available cash over cash disbursementsBeginning cash balanceCash receipts for SeptemberBorrowings		$enter a dollar amount
select between addition and deduction                                                          AddLess: select a cash budget item                                                          Ending cash balanceCash receipts for SeptemberCash disbursements for SeptemberExcess (deficiency) of available cash over cash disbursementsBorrowingsBeginning cash balanceTotal available cash		enter a dollar amount
select a summarizing line for the first part                                                          Excess (deficiency) of available cash over cash disbursementsCash receipts for SeptemberTotal available cashBeginning cash balanceEnding cash balanceCash disbursements for SeptemberBorrowings		enter a total amount for the first part
select between addition and deduction                                                          AddLess: select a cash budget item                                                          Total available cashCash disbursements for SeptemberBeginning cash balanceEnding cash balanceExcess (deficiency) of available cash over cash disbursementsCash receipts for SeptemberBorrowings		enter a dollar amount
select a summarizing line for the second part                                                          Cash disbursements for SeptemberEnding cash balanceExcess (deficiency) of available cash over cash disbursementsBorrowingsTotal available cashCash receipts for SeptemberBeginning cash balance		enter a total amount for the second part
select between addition and deduction                                                          AddLess: select a cash budget item                                                          Total available cashExcess (deficiency) of available cash over cash disbursementsCash disbursements for SeptemberEnding cash balanceCash receipts for SeptemberBorrowingsBeginning cash balance		enter a dollar amount
select a closing cash budget item                                                          BorrowingsCash receipts for SeptemberTotal available cashCash disbursements for SeptemberExcess (deficiency) of available cash over cash disbursementsBeginning cash balanceEnding cash balance		$enter a total amount for the cash budget

2.

Kingbird Company expects to have a cash balance of $65,250 on January 1, 2022. These are the relevant monthly budget data for the first two months of 2022.

1.		Collections from customers: January $90,250, February $165,250.
2.		Payments to suppliers: January $59,250, February $94,250.
3.		Wages: January $30,780 and February $40,780. Wages are paid in the month they are incurred.
4.		Administrative expenses: January $21,780 and February $24,780. These costs include depreciation of $1,000 per month. All other costs are paid as incurred.
5.		Selling expenses: January $15,780 and February $20,780. These costs are exclusive of depreciation. They are paid as incurred.
6.		Sales of short-term investments in January are expected to realize $12,780 in cash. Kingbird has a line of credit at a local bank that enables it to borrow up to $25,000. The company wants to maintain a minimum monthly cash balance of $39,250.

Prepare a cash budget for January and February.

Answer 1

1	FLOUNDER CORPORATION
	Cash Budget
	For September
	Beginning cash balance	13,742
	Add: Cash receipts for September	108,864
	Total available cash	122,606
	Less: Cash disbursement for September	128,800
	Excess (deficiency) of available cash over cash disbursement	(6,194)
	Add: Borrowings	15,154
	Ending cash balance	8,960
2
	Kingbird Company
	Cash Budget
	For January and February
		January	February
	Beginning cash balance	65,250	41,690
	Receipts:
	Collections from customers	90,250	165,250
	Sale of investment	12,780
	Total receipts	103,030	165,250
	Total available cash	168,280	206,940
	Less: Disbursements
	Payments to suppliers	59,250	94,250
	Wages	30,780	40,780
	Administrative expenses	20,780	23,780
	Selling expenses	15,780	20,780
	Total disbursements	126,590	179,590
	Excess of available cash over disbursements	41,690	27,350
	Borrowings	-	11,900
	Ending cash balance	41,690	39,250