Cash Payments are 13,000 for Nov. and 6,000 for Dec. Begininning cash balance in

Question

Cash Payments are 13,000 for Nov. and 6,000 for Dec. Begininning cash balance in Nov. is 5,000 which is the desired min. balance.

Prepare a cash budget. I have contructed the cash receipts schedule, however am unsure what or how to construct a cash budget based on this information regarding borrowing needed and repayments for November and December.

Cash Receipts Sept. Oct. Nov. Dec. Sales (Projected) 6000 10000 16000 12000 Collections: (40% of current sales) 4000 6400 Collections: (60% of previous month(s) sales) 3600 6000 Total Cash Receipts 7600 12400

Explanation / Answer

Note:

Borrowing Needed in Nov = Minimum Cash balance - Preliminary Cash balance

Borrowing Needed in Nov = 5000 - (-400)

Borrowing Needed in Nov = 5400

Repayment = min{borrowed , (Preliminary Cash balance-Minimum Cash balance)}

Repayment = min{5400,(11400-5000)}

Repayment = $ 5400

Cash Budget Nov Dec Beginning Cash Balance             5,000.00           5,000.00 Plus: Budgeted Cash Receipts             7,600.00        12,400.00 Total cash Available          12,600.00        17,400.00 Less: Budgeted Cash Payments          13,000.00           6,000.00 Preliminary Cash Balance              (400.00)        11,400.00    Financing:         Borrowings             5,400.00         Repayments                          -          (5,400.00) Total financing             5,400.00        (5,400.00) Ending Cash Balance             5,000.00           6,000.00

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