Motors Corporation manufactures motors for dirt bikes. The company requires a minimum $30,000 cash balance at each month-end. If necessary, the company borrows to meet this requirement at a cost of 2% interest per month (paid at the end of each month). Any preliminary cash balance above $30,000 at month-end is used to repay loans. The cash balance on July 1 is $30,000, and the company has no outstanding loans. Budgeted cash receipts and budgeted cash payments (other than for interest on the loan and loan activity) follow. Cash receipts Cash payments Beginning cash balance July $ 81,000 109,000 Total cash available 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.) August $ 107,000 95,900 Total cash payments Preliminary cash balance Additional loan (loan repayment) Ending cash balance Loan activity Loan balance, beginning of Month Additional loan (loan repayment) Loan balance, end of month MOTORS CORPORATION Cash Budget September $ 146,000 123,400 $ $ July 0 0 0 August September 0 $ 0 $ $ 0 0 0 0 $ 0 $ 0 $ 0 0 0 0 0 0
Motors Corporation manufactures motors for dirt bikes. The company requires a minimum $30,000 cash balance at each month-end. If necessary, the company borrows to meet this requirement at a cost of 2% interest per month (paid at the end of each month). Any preliminary cash balance above $30,000 at month-end is used to repay loans. The cash balance on July 1 is $30,000, and the company has no outstanding loans. Budgeted cash receipts and budgeted cash payments (other than for interest on the loan and loan activity) follow. Cash receipts Cash payments Beginning cash balance July $ 81,000 109,000 Total cash available 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.) August $ 107,000 95,900 Total cash payments Preliminary cash balance Additional loan (loan repayment) Ending cash balance Loan activity Loan balance, beginning of Month Additional loan (loan repayment) Loan balance, end of month MOTORS CORPORATION Cash Budget September $ 146,000 123,400 $ $ July 0 0 0 August September 0 $ 0 $ $ 0 0 0 0 $ 0 $ 0 $ 0 0 0 0 0 0
Chapter16: Working Capital Policy And Short-term Financing
Section: Chapter Questions
Problem 26P
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