Widmer Corp. requires a minimum $10,000 cash balance. If necessary, loans are taken to meet this requirement at a cost of 1% interest per month (paid monthly). If the ending cash balance exceeds the minimum, the excess will be applied to repaying any outstanding loan balance. The cash balance on July 1 is $10,400. Cash receipts other than for loans received for July, August, and September are forecasted as $24,000, $32,000, and $40,000, respectively. Payments other than for loan or interest payments for the same period are planned at $28,000, $30,000, and $32,000, respectively at July 1, there are no outstanding loans.Required:Prepare a cash budget for July, August, and September.

What will be an ideal response?


?JulyAugustSeptember
Cash Balance:???
 Balance (Beginning) …………… $10,400$10,000  $10,000  
 Cash Receipts ……………………24,000 32,000   40,000  
 Cash Payments …………………(28,000) (30,000)   (32,000)  
Interest paid ………………………  0   (36)*   (16)**
Preliminary Balance ……………… $ 6,400$11,964   $17,984  
Loan ……………………………… 3,600 0   0  
Repaid ……………………………  0 (1,964)   (1,636)  
Balance (Ending) ………………… $10,000$10,000   $16,348  
* $3,600 ? 1% = $36
** ($3,600 - $1,964) ? 1% = $16

Business

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