Question

You are a relatively recent hire to Hartz & Co., a local manufacturer of plumbing supply products. You have been asked to prepare, for a presentation to the company's management, a condensed cash flow statement for the months of November and December 2016 Assume the cash balance at November 1 will be $82,000. It is the company's policy to maintain a minimum cash balance of $55,000 at the end of each month. Cash receipts (from cash sales and collection of accounts receivable) are projected to be $548,000 for November and $463,000 for December. Cash disbursements (sales commissions, advertising, delivery expense, wages, utilities, etc.) prior to financing activity are scheduled to be $466,450 in November and $580,000 in December Borrowing, when needed, is done at the beginning of the month in increments of $1,000. The annual interest rate on any such loans is estimated to be 12%. Interest on any outstanding loans is paid in cash at the end of the month. Repayments of principal (if any) are assumed to occur at the end of the month. As of November 1, the company has a $55,000 long-term loan from the local bank. This loan, including interest (at 12% per year) for the month of November, is payable at the end of November Required: Use the preceding information to prepare the cash budget for November and December. (Hint: The December 31 cash balance should be $55,350.) (Amounts to be deducted should be entered with a minus sign.) Hartz & Co Cash Budget For November and December, 2016 November December Cash balance, beginning Add: Cash receipts Total cash available Cash disbursements, prior to financing Add: Minimum cash balance Total cash needed Excess (deficiency of) cash, before financing effects Financing 548,000 630,000 466,450 55,000 521,450 108,550 82,000 109,000 463,000 572,000 580,000 55,000 635,000 Short-term borrowing, beginning of month Repayments (loan principal), end of month Cash Interest, end of month (55,000) 900 (54,100) Total effects of financing

Answer 1

						november	December
Cash balance , beginning						82,000	108,000
Add:Cash receipts						548,000	463,000
total cash available		(A)				630,000	571000
cash disbursement prior to financing				(B)		466,450	580,000
Add:minimum cash balance						55,000	55,000
total cash needed			©			521,450	635,000
Excess(Deficiency) of cash ,before financing effects:						108,550	-64,000
Financing:
short term borrowing ,beginning of month						0	65,000
Repayments(loan principal),end of month						55,000	0
cash interest,end of month						550	650
total effects of financing			E			-55,550	64,350
ending cash balance			(A)-(B)+(E)			108,000	55,350