Question

Prepare Cash Budget For 3 Months
Brewster Corporation expects the following cash receipts and disbursements during the first quarter of 2016 (receipts exclude new borrowings and disbursements exclude interest payments on borrowings since January 1, 2016)

		January	February	March
Cash receipts		$300,000	$320,000	$290,000
Cash disbursements		280,000	360,000	300,000

The expected cash balance at January 1, 2016, is $82,000. Brewster wants to maintain a cash balance at the end of each month of at least $80,000. Short-term borrowings at 1% interest per month will be used to accomplish this, if necessary. Borrowings (in multiples of $1,000) will be made at the beginning of the month in which they are needed, with interest for that month paid at the end of the month. Prepare a cash budget for the quarter ended March 31, 2016.

Brewster Corporation Cash Budget for the Quarter Ended March 31, 2016
	January	February	March
Beginning cash balance	Answer	Answer	Answer
Cash receipts	Answer	Answer	Answer
Short-term borrowings	Answer	Answer	Answer
Cash available	Answer	Answer	Answer
Cash disbursements	Answer	Answer	Answer
Interest payment	Answer	Answer	Answer
Total cash disbursements	Answer	Answer	Answer
Ending cash balance	Answer	Answer	Answer

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Answer 1

Answer:

	January	February	March
Beginning Cash balance	$82,000	$102,000	$80,810
Cash receipt	300000	320000	290000
Short-term borrowings	0	19000	10000
Total cash available	382000	441000	380810
Cash Disbursements	280000	360000	300000
Interest payment	0	190	290
Total cash Disbursements	$280,000	$360,190	$300,290
Ending Cash balance	$102,000	$80,810	$80,520

Note:

• Interest for February = (19,000*1%) =190
• Interest for March= (19,000*1%) + (10,000*1%) = 290
• Cash to barrowed in multiples of $1,000