Use the following information to answer Question 3. Harvest Oaks’ beginning bala
ID: 2521016 • Letter: U
Question
Use the following information to answer Question 3.
Harvest Oaks’ beginning balance of cash on April 1 is $450,000.
Harvest Oaks wants to maintain a minimum cash balance of $400,000. The company has an agreement with a local bank that allows the company to borrow money in any increment at the beginning of each month. The interest rate on these loans is 1% per month and is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.
Question 3. Use the table below to prepare the cash budget for the second quarter.
Cash Budget
April
May
June
Quarter
Beginning cash balance
Total cash receipts
2,225,000
2,450,000
2,700,000
7,375,000
Total cash available
Less total cash disbursements
2,500,000
2,700,000
2,200,000
7,400,000
Excess (deficiency) of cash available over disbursements
Financing:
Borrowings
Repayments
Interest
Total financing
Ending cash balance
Cash Budget
April
May
June
Quarter
Beginning cash balance
Total cash receipts
2,225,000
2,450,000
2,700,000
7,375,000
Total cash available
Less total cash disbursements
2,500,000
2,700,000
2,200,000
7,400,000
Excess (deficiency) of cash available over disbursements
Financing:
Borrowings
Repayments
Interest
Total financing
Ending cash balance
Explanation / Answer
April May June Quarter Beginning cash 450000 400000 400000 Cash receipt 2225000 2450000 2700000 7375000 Total Cash Available 2675000 2850000 3100000 8625000 Less: Disburshment 2500000 2700000 2200000 7400000 Excess (deficiency) 175000 150000 900000 1225000 Financing: Borrowings 225000 250000 0 475000 Repayments 0 0 475000 475000 Interest 0 0 11750 11750 Total Financing 225000 250000 -486750 -11750 Ending Cash Balance 400000 400000 413250 Interest (225000*1%*3) = 6750 (250000*1%*2) = 5000 Total = 11750