Question

A cash budget for the first three quarters of Brister Incorporated is given below (000 omitted). The company requires a minimum cash balance of at least $5,000 to start each quarter. If necessary, the company will borrow money from its bank to maintain this balance. The company will pay no interest in Quarters 1, 2, and 3. It will repay as much of its borrowings as possible as soon as it has more than $5,000 in cash in a given quarter. Suppose the company starts the first quarter with no bank debt. How much total bank debt does the company expect to have at the end of the third quarter?

Cash Budget	Quarter (000 omitted)
	1	2	3
Cash balance, beginning	$8	?	?
Add collections from customers	88	127	90
Total cash available	?	?	?
Less disbursements:
Purchase of inventory	55	65	65
Selling and administrative expenses	41	45	51
Equipment purchases	9	10	10
Dividends	2	2	2
Total disbursements	?	?	?
Excess (deficiency) of cash available over disbursements	?	?	?
Financing:
Borrowings	?	?	?
Repayments	?	?	?
Total financing	?	?	?
Cash balance, ending	?	?	?

Multiple Choice

• $38,000

• $49,000

• $5,000

• $16,000

Answer 1

Cash Budget (amount in 000)

Details	1	2	3
Opening Cash Balance	8	5	5
Add:Collections from customers	88	127	90
Total Cash available	96	132	95
Less:Disbursements
Purchase of inventory	55	65	65
Selling & administrative expenses	41	45	51
Equpiment purchases	9	10	10
Dividend	2	2	2
Total disbursements	107	122	128
Excess/(deficiency) of cash	(11)	10	(33)
Financing:
Borrowing	16	0	38
Repayments	0	5	0
Total financing	16	11	49
Cash balance ending	5	5	5

Borrowings=Deifciency+5000(minimum cash balance)

Bank debt at end of third quarter $49,000