4. Lindsey Chocolate, Inc. has prepared its third quarter budget and provided th

Question

4. Lindsey Chocolate, Inc. has prepared its third quarter budget and provided the following data: Jul $49,000 $39,500 $47,200 Au ash collections ash payments: Purchases of direct materials erating expenses apital expenditures 30,00021,90018,000 12,400 13,40024,200 8,40011,400 0 The cash balance on June 30 is projected to be $4,000. The company has to maintain a minimum cash balance of $5,000 and is authorized to borrow at the end of each month to make up any shortfalls. It may borrow in increments of $5,000 and has to pay interest every month at an annual rate of 4%. All financing transactions are assumed to take place at the end of the month. The loan balance should be repaid in increments of $5,000 whenever there is surplus cash. Calculate the ending projected cash balance before financing for August.

Explanation / Answer

Lindsey Chocolate Inc. Calucultion of total available cash for the month of July Particulars Amount in $ Opening cash Balance 4000 (Cash Balance on June 30) Cash collected during the month 49000 53000 Add: Amount Borrowed 10000 Total    (A) 63000 caluculation of Expenditure for the Month of July Particulars Amount in $ Purchase of Direct Material 30000 Operating Expenses 12400 Capital Expenditure 13400 55800 Add: Cash to be Maintained 5000 Total Cash reqired       (B) 60800 Ending Projected cash Balance Before Financing for August    (A-B)      = $   2200 Note : An Amount of 10,000 $ is borrowed for meeting the required expenses

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