Question

Karim Corp. requires a minimum $9,100 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 July 1 is $9,500 and the company has no outstanding loans. Forecasted cash receipts (other than for loans received) and forecasted cash payments (other than for loan or interest payments) follow.

July August September
Cash receipts $ 25,100 $33,100 $ 41,100
Cash payments 29,650 31,100 33,100
Prepare a cash budget for July, August, and September. (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

Month July August September

Beginning balance 9,500 9,100 9,100

Cash receipts 25,100 33,100 41,100

Cash payments -29,650 -31,100 -33,100

balance 4,950 11,100 17,100

interests 0 -83 -143.66

loan 4,150 -1,917 -7,183

Pending balance 9,100 9,100 9,773.34