Question

Question 5:
Corrugated Box Company had the following estimated cash flows for the third quarter:
	August	September	October	Quarter
Cash receipts	$900,000	$1,000,000	$1,300,000	$3,200,000
Cash disbursements	1,100,000	1,000,000	1,000,000	3,100,000
The company begins the year with $100,000 in cash and requires a minimum cash balance of $25,000. The company may borrow any amount from a local bank at an annual interest rate of 3%, 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.

Answer 1

Cash Budget
	August	September	October	Quarter
Beginning Balance	$      100,000.00	$      25,000.00	$       25,000.00	$     100,000.00
Cash Collections	$      900,000.00	$1,000,000.00	$ 1,300,000.00	$ 3,200,000.00
Total Cash Available	$   1,000,000.00	$1,025,000.00	$ 1,325,000.00	$ 3,300,000.00
Less : Cash Payments	$   1,100,000.00	$1,000,000.00	$ 1,000,000.00	$ 3,100,000.00
Preliminary Ending Balance	$     -100,000.00	$      25,000.00	$     325,000.00	$     200,000.00
Financing
Borrowings	$      125,000.00			$     125,000.00
Repayment			$   -125,000.00	$   -125,000.00
Interest			$           -937.50	$           -937.50
Total Financing	$      125,000.00	$                    -	$   -125,937.50	$           -937.50
Ending Balance	$        25,000.00	$     25,000.00	$    199,062.50	$    199,062.50