A company requires a minimum $12,400 cash balance at each month-end. If necessary, a loan is taken to meet this requirement at a cost of 1% interest per month (paid at the end of each month). Any preliminary cash balance above $12,400 is used to repay loans at month-end. The cash balance on March 1 is $12,400, and the company has no outstanding loans. Budgeted cash receipts from sales are: March, $26,000; April, $32,400; and May, $41,000. Budgeted cash payments (excluding loan or interest payments) are: March, $30,000; April, $30,200; and May, $32,400. Required: Prepare a cash budget for March, April, and May. Note: Negative balances and Loan repayment amounts (if any) should be indicated with minus sign. Round your final answers to the nearest whole dollar. Beginning cash balance Add: Cash receipts from sales Total cash available Add: Cash receipts from sales Total cash payments Preliminary cash balance Loan activity Additional loan (loan repayment) Ending cash balance Loan balance, Beginning of month Additional loan or Repayment of loan Loan balance, End of month Cash Budget $ March April May 12,400 $ 12,400 $ 12,400 0 0 0 Loan balance $ 0
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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