Question

Foyert Corp. requires a minimum $7,900 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 $7,900 and the company has an outstanding loan of $3,900. Forecasted cash receipts (other than for loans received) and forecasted cash payments (other than for loan or interest payments) follow. October November December Cash receipts $ 23,900 $ 17,900 $ 21,900 Cash disbursements 26,850 16,900 14,100 Prepare a cash budget for October, November, and December. (Negative balance and Loan repayment amount should be indicated with minus sign.)

Answer 1

Foyert Corp.

Cash Balance

October November December

Beginning balance $7,900 $7,900 $7,900

Outstanding loan 2% $3,900 $6,928 $6,066.56

Cash receipts $23,900 $17,900 $21,900

Cash disbursements $26,850 $16,900 $14,100

Interest payments $78 $138.56 $121.33

Ending balance $4,872 $8,761.44 $15,778.67

Required new loan $3,028 -$861.44 -$6,066.56

Final cash balance $7,900 $7,900 $9,512.11

At the end of the year, the company will have $0 loans and $9,512.11 in cash.