Karim Corp. requires a minimum $9,700 cash balance. If necessary, loans are take

Question

Karim Corp. requires a minimum $9,700 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 $10,100 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 August Cash receipts Cash payments ptember $25,700 33,700 $41,780 ??, sse 31,700 33,70 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 10,100 Total cash available Preliminary cash balance Ending cash balance Loan balance Loan balance-Beginning of month Additional loan (loan repayment) Loan balance End of month

Explanation / Answer

Explanation:

August

Interest on bank loan ($4,450 × 2%) = 89

September

Interest on bank loan ($2539 × 2%) = 51

KARIM CORP. Cash Budget For July, August, and September July August September Beginning cash balance 10100 9700 9700 Cash receipts 25700 33700 41700 Total cash available 35800 43400 51400 Cash disbursements 30550 31700 33700 Interest on bank loan 89 51 Preliminary cash balance 5250 11611 17649 Additional loan (loan repayment) 4450 (1911) (2539) Ending cash balance 9700 9700 15110 Loan balance Loan balance ­ Beginning of month 0 4450 2539 Additional loan (loan repayment) 4450 (1911) (2539) Loan balance ­ End of month 4450 2539 0

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