ZD Inc. is preparing its budget for the upcoming fiscal year. Management has prepared the following summary of its budgeted cash flows:
Total cash receipts for the 1st Quarter $ 180,000 and for 2nd Quarter is $330,000
Total cash disbursements 1st Quarter $ 26,000 and for 2nd Quarter is $230,000
The company’s beginning cash balance for the upcoming fiscal year will be $20,000. The company requires a minimum cash balance of $10,000 and may borrow any amount needed from a local bank at a quarterly interest rate of 3%. The company may borrow any amount at the beginning of any quarter and may repay its loans, or any part of its loans, at the end of any quarter. Interest payments are due on any principal at the time it is repaid. For simplicity, assume that interest is not compounded. Prepare the company’s cash budget for the 1st Quarter and 2nd Quarter.
Answer-
| ZD INC. | ||
| Cash Budget | ||
| Quarter | ||
| Particulars | 1st | 2nd |
| $ | $ | |
| Beginning cash balance | 20000 | 10000 |
| Total cash receipts | 180000 | 330000 |
| Total cash available | 200000 | 340000 |
| Total cash disbursements | 260000 | 230000 |
| Excess of cash available over disbursements | -60000 | 110000 |
| Financing:- | ||
| Borrowings | 70000 | 0 |
| Repayments | 0 | -70000 |
| Interest | 0 | -4200 |
| Tota financing | 70000 | -74200 |
| Ending cash balance | 10000 | 35800 |
Where- Interest amount = $70000*3%*2 quarter
= $4200
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