Widmer Corp. requires a minimum $10,000 cash balance. If necessary, loans are ta

Question

Widmer Corp. requires a minimum $10,000 cash balance. If necessary, loans are taken to meet this requirement at a cost of 1% interest per month (paid monthly). If the ending cash balance exceeds the minimum, the excess will be applied to repaying any outstanding loan balance. The cash balance on July 1 is $10,400. Cash receipts other than for loans received for July, August, and September are forecasted as $24,000, $32,000, and $40,000, respectively. Payments other than for loan or interest payments for the same period are planned at $28,000, $30,000, and $32,000, respectively at July 1, there are no outstanding loans.

Required:
Prepare a cash budget for July, August, and September.

Explanation / Answer

July August September Opening Balance 10400 10000 10000 Cash receipts 24000 32000 40000 Cash payment 28000 30000 32000 Interest on loan 36 16.36 Closing Blance 6400 11964 17983.64 Required Balance 10000 10000 10000 Loan requirement/(repay) 3600 -1964 -1636 Adjusted Closing Balance 10000 10000 16347.64

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