Prepare Cash Budget For 3 Months Brewster Corporation expects the following cash receipts and disbursements during the first quarter of 2016 (receipts exclude new borrowings and disbursements exclude interest payments on borrowings since January 1, 2016)
January February March
Cash receipts $280,000 $300,000 $270,000
Cash disbursements 260,000 340,000 280,000
The expected cash balance at January 1, 2016, is $62,000. Brewster wants to maintain a cash balance at the end of each month of at least $60,000. Short-term borrowings at 1% interest per month will be used to accomplish this, if necessary. Borrowings (in multiples of $1,000) will be made at the beginning of the month in which they are needed, with interest for that month paid at the end of the month. Prepare a cash budget for the quarter ended March 31, 2016.

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ANTHOUGOGO ANTHOUGOGO · Answer 1

Brewster Corporation's Cash Budget for the three months will be prepared as follows:

Cash Budget

January February March

Beginning balance $62,000 $82,000 $60,810

Cash receipts $280,000 $300,000 $270,000

Borrowings 19,000 10,000

Total cash available $342,000 $401,000 $340,810

Cash disbursements 260,000 340,000 280,000

Interest payment on loan (190) (290)

Ending balance $82,000 $60,810 $60,520

Minimum cash balance $60,000 $60,000 $60,000

Data and Calculations:

January February March

Beginning balance $62,000 $82,000 $60,810

Cash receipts $280,000 $300,000 $270,000

Borrowings in February and March = $19,000 and $10,000

Interest payment on loans (February) = $190 ($19,000 x 1%)

Interest payment on loans (March) = $290 ($29,000 x 1%)

Required minimum monthly cash balance = $60,000

Thus, Brewster Corporation's cash budget for the first quarter of 2016 shows a cash balance of $60,520 with a loan of $29,000.

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