Answered: Premium-Inn had the following estimated…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter8: Budgeting

Section: Chapter Questions

Problem 19E: Schedule of cash payments for service company Horizon Financial Inc. was organized on February 28....

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Premium-Inn had the following estimated cash flows for the first quarter:

	January	February	March	Quarter
Cash receipts	£800,000	£1,000,000	£1,300,000	£3,100,000
Cash disbursements	£1,000,000	£1,000,000	£1,000,000	£3,000,000

The company begins the year with £100,000 in cash and requires a minimum cash balance of £30,000. The company may borrow any amount from a local bank at an annual interest rate of 4%, The borrowing must occur at the beginning of any month and all repayments must be made at the end of any month. Interest must be repaid at the time of loan repayment.

Required:

In good form, prepare the company’s cash budget for the upcoming year.

Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.

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