The company wants to maintain a minimum cash balance of $35,000 and borrows from the local bank as needed in increments of $1,000 at the beginning of the quarter. Principal repayments are made at the beginning of the quarter when excess funds are available and in increments of $1,000. Interest is 6% per year and paid at the beginning of the quarter based on the amount outstanding from the previous quarter Kiara's Coats Cash Budget For the year ended December 31, 2021 First Quarter Second Quarter Third Quarter Fourth Quarter Total Beginning cash balance $38,000 $35,569 $35,185 Cash receipts $71,600 $75,400 91,650 107,900 346,550 Cash available $109,600 $110,969 126,835 Cash payments: Total cash payments before interest $107,031 $52,289 57,755 63,639 280,714 Interest expense $0 $495 495 Total cash payments $107,031 $52,784 58,250 Ending cash balance before financing $2,569 $58,185 68,535 Minimum cash balance desired ($35,000) ($35,000) ($35,000) ($35,000) ($35,000) Projected cash excess (deficiency) ($32,341) $23,185 33,585 Financing: Borrowing $33,000 $0 0 Principal repayments $0 $0 0 Total effects of financing $33,000 $0 0 Ending cash balance $35,569 $35,185 Correct! Correct! Try Again! Try Again! Try Again!

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The company wants to maintain a minimum cash balance of $35,000 and borrows from the local bank as needed in increments of $1,000 at the beginning of the quarter. Principal repayments are made at the beginning of the quarter when excess funds are available and in increments of $1,000. Interest is 6% per year and paid at the beginning of the quarter based on the amount outstanding from the previous quarter

Kiara's Coats
Cash Budget
For the year ended December 31, 2021
	First Quarter	Second Quarter	Third Quarter	Fourth Quarter	Total
Beginning cash balance	$38,000	$35,569	$35,185
Cash receipts	$71,600	$75,400	91,650	107,900	346,550
Cash available	$109,600	$110,969	126,835
Cash payments:
Total cash payments before interest	$107,031	$52,289	57,755	63,639	280,714
Interest expense	$0	$495	495
Total cash payments	$107,031	$52,784	58,250
Ending cash balance before financing	$2,569	$58,185	68,535
Minimum cash balance desired	($35,000)	($35,000)	($35,000)	($35,000)	($35,000)
Projected cash excess (deficiency)	($32,341)	$23,185	33,585
Financing:
Borrowing	$33,000	$0	0
Principal repayments	$0	$0	0
Total effects of financing	$33,000	$0	0
Ending cash balance	$35,569	$35,185
	Correct!	Correct!	Try Again!	Try Again!	Try Again!

Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.

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