Generating of a Cash budget.
The following budget estimates have been prepared by Flowers Company:
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Cash Receipts
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Cash Payments
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January
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$220,000
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$220,000
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February
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380,000
|
400,000
|
|
March
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320,000
|
319,800
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The company likes to maintain a minimum cash balance of $50,000.
Any excess cash is invested in a money market account earning 8 percent 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 percent interest with the local bank.
Assume a cash balance on January 1 of $50,000, a money market account balance of $0, and a credit line loan balance of $0.
Required:
Prepare a cash budget for each of the first three months of the year