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The ABC Company has made the following monthly estimates of cash receipts and cash disbursements when...

The ABC Company has made the following monthly estimates of cash receipts and cash disbursements when preparing cash budgets for the next twelve months. ABC has beginning cash on hand of $25,000 and wants to maintain this minimum cash level throughout the next year. Cash Cash Month Receipts Disbursements January $100,000 $110,000 February $90,000 $110,000 March $95,000 $115,000 April $100,000 $150,000 May $130,000 $180,000 June $160,000 $180,000 July $200,000 $190,000 August $245,000 $180,000 September $245,000 $150,000 October $180,000 $120,000 November $140,000 $110,000 December $100,000 $100,000 A. Will ABC have to borrow cash during the next year? B. If the company does need cash, in which month will it first need the cash? C. What is the most cash the company will need to borrow during the year (maximum amount borrowed in one month)? D. Will the company have paid back all of its borrowings by the end of the year?

Solutions

Expert Solution

Month Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Beginning cash balance 25000 25000 25000 25000 25000 25000 25000 25000 25000 25000 25000 25000
cash receipts 100000 90000 95000 100000 130000 160000 200000 245000 245000 180000 140000 100000
total cash available 125000 115000 120000 125000 155000 185000 225000 270000 270000 205000 165000 125000
cash disbursement 110000 110000 115000 150000 180000 180000 190000 180000 150000 120000 110000 100000
cash available 15000 5000 5000 -25000 -25000 5000 35000 90000 120000 85000 55000 25000
Minimum cash balance 25000 25000 25000 25000 25000 25000 25000 25000 25000 25000 25000 25000
amount borrowed or paid -10000 -20000 -20000 -50000 -50000 -20000 10000 65000 95000 60000 30000 0
balance in Borrowed amount or avaialbility of cash -10000 -30000 -50000 -100000 -150000 -170000 -160000 -95000 0 60000 90000 90000
A- no fund would be borrowed next year as sufficient cash are available 90000
B- In the month of january
C- In the month of April and May
d- Yes as sufficient cash are avaialble to pay all the debts

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