Question

Below are the forecasted cash receipts and cash payments for Kaden Company for the first four...

Below are the forecasted cash receipts and cash payments for Kaden Company for the first four months of the year.

  

                                                            January         February          March             April

Budgeted cash collections               100,000            80,000          75,000       146,000

                                                                                                                            

Budgeted cash payments:                                                                                     

Operating expenses                       127,000           105,000          92,000      120,000

Dividends                                                    0             20,000                   0                 0

Equipment purchase                                 0             40,000                   0                 0

Total budgeted cash payments       127,000           165,000         92,000      120,000

  

On January 1, Kaden Company had a cash balance of $50,000. Kaden has a policy of maintaining a cash balance of at least $10,000 at the end of each month.

  

Assume that Kaden Company had no outstanding loans on January 1. Also assume that there is no interest cost for its loans. What it the balance in Kaden Company’s loans as of the end of April?

  • $17,000

  • $26,000

  • $63,000

  • $9,000

  • $0

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Answer #1

OPTION C---$63000

Particulars Jan Feb March April
Beginning cash balance 50000 23000 10000 10000
Budgeted cash collection 100000 80000 75000 146000
Cash available 150000 103000 85000 156000
Budgeted cash payments
Operating expenses 127000 105000 92000 120000
Dividend 0 20000 0 0
Equipment purchases 0 40000 0 0
Total budgeted cash payments 127000 165000 92000 120000
Preliminary budgeted cash balance 23000 (62000) (7000) 36000
Borrowing - 72000 17000
Loan repayment - 26000
Ending cash balance 23000 10000 10000 10000

Loan Balance at april end =72000+17000-26000=$63000

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