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).

Exercise 22-14 Cash budget LO P1

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

 

Prepare a cash budget for October, November, and December. Explanation: October October's beginning cash balance includes an outstanding loan balance of $10,000. Interest on bank loan ($10,000 × 1%) = 100   November Interest on bank loan ($20,100 × 1%) = 201   December Interest on bank loan ($15,300 × 1%) = 153