problem: The following budget estimates have been prepared by Flowers Company:
|
|
Cash Receipts
|
Cash Payments
|
|
January
|
$220,000
|
$220,000
|
|
February
|
380,000
|
400,000
|
|
March
|
320,000
|
319,800
|
The company likes to keep a minimum cash balance of dollar 50,000.
Any excess cash is invested in a money market account earning 8% compounded monthly. Interest is reinvested in the money market account. Any cash deficiencies are covered by a withdrawal from the money market account. If additional cash is needed, the company has a line of credit at 12% interest with the local bank.
Assume a cash balance on January 1 of dollar 50,000, a money market account balance of dollar 0, & a credit line loan balance of dollar 0.
Required:
Make a cash budget for each of the first 3 months of the year.