Question

1. Deedre Manufacturing has a cash balance of $8,000 on August 1 of the current year. The company's controller forecast the following cash receipts and cash disbursements:
   
   Cash Receipts Cash Payments
   August $45,000 $57,000
   September $66,000 $67,000
   October $70,000 $56,000
   
   Management desires a minimum balance of $8,000 at all times. If necessary, additional financing can be obtained at a 12% interest rate. Interest is paid at the time of repaying loan principal. Note: for calculating interest, if our budget indicates we will need to borrow money, we will plan to do so at the beginning of the month & make any repayments at the end of the month.
   
   Use the format below to create a cash balance. Denote if negative. Hint: After your first run-through, be sure to refer to your study guide for verification. An error early on will cause your remaining answers to be incorrect.
   
               August         September October
   Beginning Cash balance
   Add: Cash Receipts
   Subtotal
   Less: Cash payments
   Cash balance before fin/repay
   Financing:
   Borrowing to maintain min.
   Principal repayment
   Interest payment
   Ending Cash balance
   
   What is the August Cash balance before financing/repayment?
   

   

2.) What is the net financing for August. (Borrowing would be a positive number (no sign), repayment a negative.)   

3.) What is the ending Cash balance for August? Denote if negative.

4.) What is the beginning cash balance for September? Denote if negative.  

5.) What is the net financing for September? (borrowing would be a positive number (no sign), repayment a negative.)  

6.) What was the beginning balance for October? Denote if negative.   

7.) What is the cash balance before financing/repayment for October? Denote if negative.  

8.) What is the net financing for October? (Borrowing would be a positive number (no sign), repayment a negative.)   

9.) What is the ending cash balance for October? Denote if negative.

Answer 1

Cash budget

	August	September	October
Beginning cash balance	$8,000	$8,000 (Answer 4)	$8,000 [Answer 6]
Add:cash receipts	$45,000	$66,000	$70,000
Sub Total	$53,000	$74,000	$78,000
Less: cash payments	$57,000	$67,000	$56,000
cash balance before fin/repay	-$4,000[$8,000+$45,000-$57,000] (Answer 1)	$7,000[$74,000-67,000]	$22,000[$78,000-$56,000](Answer 7)
Financing
Borrow to maintain minimum balance	$12,000[-4,000-8,000] (Answer 2)	$1,000 [Answer 5]	0
Principal repayment	0	0	($13,000) [Answer 8]
Interest payment	0	0	($380) ($12,000*3% 3 months interest )+($1,000*2% two month interest as loan is repaid at the end of month)
Ending cash balance	$8,000[12,000-4,000] (ANswer 3)	$8,000[7,000+1,000]	$8,620 [$22,000-13,000-380] [Answer 9]

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