A) Assume that Harvest Oaks has correctly computed its expected cash receipts an
ID: 2523704 • Letter: A
Question
A) Assume that Harvest Oaks has correctly computed its expected cash receipts and disbursements, and correctly entered them into the cash budget in Part 2.
B) Harvest Oaks’ beginning balance of cash on April 1 is $450,000.
C) Harvest Oaks wants to maintain a minimum cash balance of $400,000. The company has an agreement with a local bank that allows the company to borrow money in any increment at the beginning of each month. The interest rate on these loans is 1% per month and is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.
Cash Budget
April
May
June
Quarter
Beginning cash balance
Total cash receipts
2,225,000
2,450,000
2,700,000
7,375,000
Total cash available
Less total cash disbursements
2,500,000
2,700,000
2,200,000
7,400,000
Excess (deficiency) of cash available over disbursements
Financing:
Borrowings
Repayments
Interest
Total financing
Ending cash balance
413,250
Cash Budget
April
May
June
Quarter
Beginning cash balance
Total cash receipts
2,225,000
2,450,000
2,700,000
7,375,000
Total cash available
Less total cash disbursements
2,500,000
2,700,000
2,200,000
7,400,000
Excess (deficiency) of cash available over disbursements
Financing:
Borrowings
Repayments
Interest
Total financing
Ending cash balance
413,250
Explanation / Answer
Cash Budget April May June Quarter Cash balance in Beginning 450000 400000 400000 450000 Add: cash receipts 2,225,000 2,450,000 2,700,000 7,375,000 Total cash available 2,675,000 2,850,000 3,100,000 7,825,000 Less: expected disbursals 2,500,000 2,700,000 2,200,000 7,400,000 Excess/ Shortage of cash 175,000 150,000 900,000 425,000 Financing: Borrowing 225000 250000 0 475000 Repayment -475000 -475000 Interest -11750 -11750 Total Financing: 225000 475000 0 0 Ending cash balance 400000 400000 410750 413250
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