Temecula,inc., budgets the following cash receipts and cash payments for the qua

Question

Temecula,inc., budgets the following cash receipts and cash payments for the quarter of 2014. The firm has 5,000 dollars of cash on hand at the end of june, and Management budgets an ending cash balances of 55,000 dollars at the end of each month.Temecula has arranged short-term borrowing from its bank as needed. The agreement requires Temecula to borrow in 1,000 dollars increments at the beginning of the months needed. Interest is 6 percent annually. Temecula will repay principal in thousands dollar increment plus accrued interest borrowing at the end of month when fund permit.

Explanation / Answer

July August September Total Beginning Cash              5,000               5,000                5,000             15,000 Monthly Cash flow            (3,000)             (6,000)              10,000                1,000 Net cash before financing              2,000             (1,000)              15,000             16,000 Borrowing              3,000               6,000                       -                  9,000 repayment of borrowing                     -                        -                (9,000)             (9,000) Interest Payment                     -                        -                      105                   105 Ending Cash              5,000               5,000                5,895             15,895

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