Question

Steph Corp. requires a minimum $12,000 cash balance. If necessary, loans are taken to meet this requirement at a cost of 1% interest per month (paid monthly). If the ending cash balance exceeds the minimum, the excess will be applied to repaying any outstanding loan balance. The cash balance on July 1 is $12,000. Cash receipts other than for loans received for July, August, and September are forecasted as $35,000, $85,000, and $82,000, respectively. Payments other than for loan or interest payments for the same period are planned at $38,500, $82,000, and $62,000, respectively at July 1, there are no outstanding loans.

Prepare a cash budget for July, August, and September.

Answer 1

Cash budget

	July	August	September
Beginning cash balance	12,000	12,000	12,000
Cash receipts	35,000	85,000	82,000
Total cash available	47,000	97,000	94,000
Cash payments	- 38,500	- 82,000	- 62,000
Interest expense	0	- 35	- 5.35
Preliminary cash balance	8,500	14,965	31,995
Additional loan (Loan repayment)	3,500	- 2,965	- 535
Ending balance	12,000	12,000	31,460
	Loan balance
Loan balance- beginning of month	0	3,500	535
Additional loan (Loan repayment)	3,500	- 2,965	- 535
Loan balance-end of month	3,500	535	0