Question

	Jul	Aug	Sep
Cash collections	$50,000	$39,500	$47,400
Cash payments:
Purchases of direct materials	30,000	21,300	17,800
Operating expenses	12,000	8,000	11,400
Capital expenditures	13,500	24,800	0

The cash balance on June 30 is projected to be $4,000. The company has to maintain a minimum cash balance of $5,000 and is authorized to borrow at the end of each month to make up any shortfalls. It may borrow in increments of $5,000 and has to pay interest every month at an annual rate of 5%. All financing transactions are assumed to take place at the end of the month. The loan balance should be repaid in increments of $5,000 whenever there is surplus cash. How much will the company have to borrow at the end of August?

Answer 1

	Cash Budget
	Particulars			July	August
	Beginning Balance			$    4,000.00	$    8,500.00
Add:	Cash Receipts			$ 50,000.00	$ 39,500.00
	Total Cash available			$ 54,000.00	$ 48,000.00
Less:	Disbursements
	Purchase of D.M			$(30,000.00)	$(21,300.00)
	Operating Expenses			$(12,000.00)	$   (8,000.00)
	Capital Expenditure			$(13,500.00)	$(24,800.00)
	Total Cash Expense			$(55,500.00)	$(54,100.00)
	Excess/ (Deficiency) of cash			$   (1,500.00)	$   (6,100.00)
	Financing:
	Borrowings			$ 10,000.00	$ 15,000.00
	Repayment			$                -
	Interest			$                -	$        (41.67)
	Total Financing			$ 10,000.00	$ 14,958.33
	Ending Cash Balance			$    8,500.00	$    8,858.33

Therefore, the company needs to borrow $ 15000 at the end of August