Question

Exercise 8-11 Cash Budget Analysis [LO8-8] A cash budget, by quarters, is given below for a retail company (000 omitted). The company requires a minimum cash balance of at least $5,000 to start each quarter. Fill in the missing amounts. (Enter your answers in thousands of dollars. Cash deficiencies and Repayments should be indicated by a minus sign.)

Quarter (000 omitted) (000 omitted) 1 2 3 4 Year Cash balance, beginning $6 Add collections from customers 96 323 Total cash available 71 Less disbursements: Purchase of inventory 35 45 35 Selling and administrative expenses 30 30 113 Equipment purchases 8 8 10 36 Dividends 2 2 2 2 Total disbursements 85 Excess (deficiency) of cash available over disbursements (2) 11 Financing: Borrowings 15 Repayments (including interest)* (17) Total financing Cash balance, ending *Interest will total $1,000 for the year.

Answer 1

Solution:

Cash Budget
Particulars	Quarter ('000 Omitted)	(000 omitted)
1	2	3	4	Year
Cash Balance, Beginning	$6.00	$5.00	$5.00	$5.00	$6.00
Add: Collections from customers	$65.00	$70.00	$96.00	$92.00	$323.00
Total cash available	$71.00	$75.00	$101.00	$97.00	$329.00
Less: Disbursements:
Purchase of inventory	$35.00	$45.00	$48.00	$35.00	$163.00
Selling and administrative expenses	$28.00	$30.00	$30.00	$25.00	$113.00
Equipment purchases	$8.00	$8.00	$10.00	$10.00	$36.00
Dividends	$2.00	$2.00	$2.00	$2.00	$8.00
Total disbursements	$73.00	$85.00	$90.00	$72.00	$320.00
Excess (deficiency) of cash available over disbursements	-$2.00	-$10.00	$11.00	$25.00	$9.00
Financing:
Borrowing	$7.00	$15.00	$0.00	$0.00	$22.00
Repayments (Including interest)	$0.00	$0.00	-$6.00	-$17.00	-$23.00
Total financing	$7.00	$15.00	-$6.00	-$17.00	-$1.00
Cash balance, ending	$5.00	$5.00	$5.00	$8.00	$8.00