Karim Corp. requires a minimum $8,700 cash balance. If necessary, loans are take

Question

Karim Corp. requires a minimum $8,700 cash balance. If necessary, loans are taken to meet this requirement at a cost of 2% interest per month (paid monthly). Any excess cash is used to repay loans at month-end. The cash balance on July 1 is $9,100 and the company has no outstanding loans. Forecasted cash receipts (other than for loans received) and forecasted cash payments (other than for loan or interest payments) follow.

July Cash receipts Cash payments AugustSeptember $40,700 32,700 $24,700 $32,700 29,050 30,700 Prepare a cash budget for July, August, and September. (Negative balances and Loan repayment amounts (if any) should be indicated with minus sign. Round your final answers to the nearest whole dollar.) KARIM CORP Cash Budget For July, August, and September July August September Beginning cash balance 9,100 Total cash available Preliminary cash balance Ending cash balance Loan balance Loa n balance - Beginning of month Additional loan (loan repayment) Loan balance End of month

Explanation / Answer

Cash budget :

July August September Beginning cash balance 9100 8700 8700 Cash receipt 24700 32700 40700 Total cash available 33800 41400 49400 Cash payment -29050 -30700 -32700 Interest expense -79 -41 Preliminary cash balance 4750 10621 16659 Loan taken (repay) 3950 -1921 -2029 Ending cash balance 8700 8700 14630 Loan balance beginning of month 0 3950 2029 Additional loan (repayment) 3950 -1921 -2029 Loan balance-end of month 3950 2029 0

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