In: Accounting
Honolua Company is preparing a cash budget for November.
Required: Use the Excel worksheet provided with the exam to provide support for answering the following questions. Be sure to write your answers in the boxes below each question.
1. Prepare in good form a cash budget that shows the amount, if any, that the company must borrow during November. Separate your budget, at a minimum, into the following categories:
Beginning Cash Balance
Operating Cash Flows (Both Inflows and Outflows)
Cash Balance before Financing Effects
Financing Activity
Ending Cash Balance
2. What is Honolua Company’s needed LOC borrowing in November under the above budget?
DATA: | |
Forecasted Sales | $ 1,000,000 |
Cash Sales | 25% |
Bank Credit-Card Sales | 75% |
Bank Fee on Credit-Card Sales | 3% |
Sales Price Markup on Cost | 160% |
Operating Expenses (including Depreciation) | $ 45,000 |
Depreciation | $ 25,000 |
Sales Commission Rate (bases on Sales $) | 4% |
Note Due in November (principal) | $ 400,000 |
Interest Rate (annual) | 12% |
Beginning Cash Balance | $ 150,000 |
Minimum Cash Balance per LOC agreement | $ 100,000 |
a)
The cash budget is as follows with the appropriate excel formulas.
since the company needs a minimum cash balance of 100000,
the required borrowing = 100000 - 38500 = 61500
this will be shown as a cash inflow from financing activity.
( if you have any doubts leave a comment and let me know)