Question

The accountant for Kaya's Dress Shop prepared the following cash budget. Kaya's desires to maintain a cash cushion of $21,000 at the end of each month. Funds are assumed to be borrowed at the beginning of the month the shortage is anticipated and repaid on the last day of each month. Interest is charged at 12% annual rate or 1 percent per month and be paid next month after the first borrowing. Cash Budget July August September Section 1: Cash receipts Beginning cash balance $46,000 $21,000 $21,000 Add cash receipts 187,000 207,000 247,600 Total cash available 233,000 228,000 268,600 Section 2: Cash payments For inventory purchases 169,026 143,730 177,652 For S&A expenses 58,000 64,060 64,932 For interest expense 0 151 160 Total budgeted disbursements 227,026 207,941 242,744 Section 3: Financing activities Surplus (shortage) 5,974 20,059 25,856 Borrowing (repayments) 15,026 941 -4,856 Ending cash balance $21,000 $21,000 $21,000 What is net cash flow from financing activities for three months? A. 15,026 inflow B. 11,111 inflow C. 15,966 inflow D. 4,856 outflow

Answer 1

cash budget

	July	August	September
Beginning cash balance	46000	21000	21000
Cash receipts	187000	207000	247600
Total cash available	233000	228000	268600
Less: Cash payment
Inventory purchase	-169026	-143730	-177652
For S&A	-58000	-64060	-64932
For interest expense	0	-151	-160
Total cash payment	-227026	-207941	-242744
Surplus (Shortage)	5974	20059	25856
Borrowing	15026	941	-4856
Ending cash balance	21000	21000	21000

Net cash inflow (outflow) = 15026+941-4856 = 11111 inflow

So answer is b) $11111 inflow