Foyert Corp. requires a minimum $30,000 cash balance. If necessary, loans are ta

Question

Foyert Corp. requires a minimum $30,000 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 October 1 is $30,000 and the company has an outstanding loan of $10,000. Forecasted cash receipts (other than for loans received) and forecasted cash payments (other than for loan or interest payments) follow. October November December Cash receipts $ 110,000 $ 80,000 $ 100,000 Cash disbursements 120,000 75,000 80,000

Explanation / Answer

cash budget oct nov dec cash receipts 110000 80000 100000 total 110000 80000 100000 cash disbursements 120000 75000 80000 interest 100 201 153 total 120100 75201 80153 opening cash 30000 30000 30000 net increase -10100 4799 19847 total cash available 19900 34799 49847 loan 10100 -4799 -15301 closing cash 30000 30000 34546 loan balance 20100 15301 0

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