Abbreviated cash budget; financing emphasis
An abbreviated cash budget for Big Chuck Ente
Add: Cash receipts 50,000 63,000 71,000
Deduct: Cash payments -64,000 -58,000 -64,000
Cash excess (deficiency) before financing ($4,000) $ ? $ ?
Borrowing to maintain minimum balance ? ? ?
Principal repayment ? ? ?
Interest payment ? ? ?
Ending cash balance $ ? $ ? $ ?
Big Chuck wishes to maintain a $10,000 minimum cash balance at all times. Additional financing is available (and retired) in $1,000 multiples at a 12% interest rate. Assume that borrowings take place at the beginning of the month; retirements, in contrast, occur at the end of the month. Interest is paid at the time of repaying principal and computed on the portion of principal repaid.
a. Find the unknowns in Big Chuck’s abbreviated cash budget.
b. Determine the outstanding loan balance as of September 30, after any repayments have been made.