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 operating activities ? A. 227,026 outflow B. 36,111 outflow C. 36,111 inflow D. 641,600 inflow
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 |
Total cash inflow = 187000+207000+247600 = 641600
Total cash outlfow = 227026+207941+242744 = -677711
Cash outflow from operating activities = 641600-677711 = -36111
So answer is b) $36611 Outflow
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