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Q. 20-21E

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Financial & Managerial Accounting
Found in: Page 920
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

Foyert Corp. requires a minimum $30,000 cash balance. If necessary, loans are taken to meet this requirement at a cost of 1% interest per month (paid monthly). Any excess cash is used to repay loans at monthend. The cash balance on October 1 is $30,000, and the company has an outstanding loan of $10,000. Forecasted cash receipts (other than for loans received) and forecasted cash payments (other than for loan or interest payments) follow. Prepare a cash budget for October, November, and December. (Round interest payments to the nearest whole dollar.)

The ending cash balance for the month of October, November and December will be $30,000, $30,000 and $34,546.

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Step by Step Solution

Cash budget

Foyert Corp

Cash budget

For the month of October, November and December

Particulars

October

November

December

Beginning cash balance

$30,000

$30,000

$30,000

Add: Cash receipts

$110,000

$80,000

$100,000

Total cash available

$140,000

$110,000

$130,000

Cash disbursements

$120,000

$75,000

$80,000

Interest on bank loan

$100

$201

$153

Preliminary cash balance

$19,900

$34,799

$49,847

Additional loan

$10,100

($4,799)

($15,301)

Ending cash balance

$30,000

$30,000

$34,546

Working notes

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