Question

Foyert Corp. requires a minimum $6,300 cash balance. If necessary, loans are taken to meet this requirement at a cost of 2% interest per month (paid monthly). Any excess cash is used to repay loans at month-end. The cash balance on October 1 is $6,300 and the company has an outstanding loan of $2,300. Forecasted cash receipts (other than for loans received) and forecasted cash payments (other than for loan or interest payments) follow. Cash receipts Cash payments October $22,300 24,450 November $16,300 15,300 December $20, 300 15,700 Prepare a cash budget for October, November, and December. (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

FOYERT CORP Cash Budget For October, November, and December November December 6,300 6,300 16,300 S 20,300 22,600 26,600 15,300 S 15,700 90 S 7,210 S 10,828 (910) S (3,586) 6,300 S October Beginning cash balance Cash receipts Total cash available Cash Payments Interest on bank loan Preliminary cash balance Additional loan (loan repayment) Ending cash balance 6,300 S 22,300 S 28,600 S 24,450 S 46 S 4,104 S 2,196 S 6,300 S 72 7,242 Loan balance 4.496 S 3,586 (910) S (3,586) 3,586 S Loan balance Beginning of month Additional loan (loan repayment) Loan balance End of month 2,300 S 2,196 S 4,496 S $ Working Notes: Interest on bank loan October S2,300*2% $46 Interest on bank loan November = $4,496*2% = $90 Interest on bank loan December $3,586*2%= $72