7. Karim Corp. requires a minimum $8,200 cash balance. If necessary, loans are t
ID: 2586551 • Letter: 7
Question
7.
Karim Corp. requires a minimum $8,200 cash balance. If necessary, loans are taken to meet this requirement at a cost of 1% interest per month (paid monthly). Any excess cash is used to repay loans at month-end. The cash balance on July 1 is $8,600 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.
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.)
8.
Use the following information to prepare the September cash budget for PTO Manufacturing Co. The following information relates to expected cash receipts and cash payments for the month ended September 30.
Beginning cash balance, September 1, $41,000.
Budgeted cash receipts from sales in September, $262,000.
Raw materials are purchased on account. Purchase amounts are: August (actual), $71,000, and September (budgeted), $103,000. Payments for direct materials are made as follows: 65% in the month of purchase and 35% in the month following purchase.
Budgeted cash payments for direct labor in September, $31,000.
Budgeted depreciation expense for September, $3,000.
Other cash expenses budgeted for September, $56,000.
Accrued income taxes payable in September, $10,700.
Bank loan interest payable in September, $1,700.
July August September Cash receipts $ 24,200 $ 32,200 $ 40,200 Cash payments 28,300 30,200 32,200Explanation / Answer
KARIM CORPORATION CASH BUDGET For July, August and September July August Septmber Beginning cash balance 8600 8200 8200 Cash receipts 24200 32200 40200 Total cash available 32800 40400 48400 Cash disbursements 28300 30200 32200 Interest on bank loan 37 17 Preliminary cash balance 4500 10163 16183 Additional loan (loan repayment) 3700 -2000 -1700 Ending cash balance 8200 8200 14483 Loan balance Loan balance biginning of month 0 3700 1700 Additional loan (loan repayment) 3700 -2000 -1700 loan balance End of month 3700 1700 0 *Preliminary balance = Total cash available - cash payment *Interest on loan : August : Loan balance of July * 1% 3700 *1% 37 Septmber: Loan balance of August * 1% 1700 *1% 17 *Additional loan (loan repayment) Ending cash balance - Preliminary cash balance July: 8200 - 4500 = 3700 August : 8200 - 10163 = (2000) Septmber: Ending balance of august loan Ans.2 PTO MANUFACTURING COMPANY Cash Budget For Month Ended September 30 Particulars Amount Amount Beginning cash balance 41000 Cash receipts from sales 262000 Total cash available 303000 Cash Payments for: Direct materials 91800 Direct labor 31000 Other expenses 56000 Accrued taxes 10700 Interest on bank loan 1700 Total cash Payments 191200 Ending cash balance 494200 *Direct materials: (71000 * 35%) + (103000 * 65%) 24850 + 66950 91800 *Depreciation expenses are not cash expense.
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