Question

The following information pertains to Amigo Corporation:
        Month                                  Sales             Purchases
        July                                  $30,000                 $10,000
        August                               34,000                   12,000
        September 38,000                   14,000
        October                             42,000                   16,000
        November 48,000                   18,000
        December                         60,000                   20,000
Cash is collected from customers in the following manner:
        Month of sale 45%
        Month following sale 40%
        Two months following sale                               10%
        Amount uncollectible 5%
50% of purchases are paid for in cash in the month of purchase, and the other 50% is paid the following month.
Required: Complete the cash budget for the 4th quarter.

  October   November   December
Beginning Balance:             $30,000 f) ? k) ?
       
Cash Collections from:
        August                                          
        September                                                                            
        October                                                                                                                         
        November                                                                                                                    
        December                                                                                                                     
--------------- --------------- -----------------

Total Cash Collections     a) ? g) ? l) ?

Total Cash Available b) ? h) ? m) ?

Cash Payments from:
        September                                    
        October                                                                                 
        November                                                                                                                    
        December                                                                                                                     
--------------- --------------- ---------------

Total Cash Payments c) ? i) ? n) ?   

Ending Cash Balance    d) ? j) ? o) ?

Amigo has $50,000 principal loan balance and needs to pay it, but also needs to keep a $10,000 minimum balance. What month is the earliest that Amigo can pay off this loan while keeping the minimum cash balance? p) ?

Answer 1

Amigo can pay off this loan while keeping a minimum balance of $10,000 in the month of November.