AAA Company Is Preparing Its 3rd Quarter Budget and Provides

Essay

AAA Company is preparing its 3rd quarter budget and provides the following data:
$\begin{array}{|l|r|r|r|}\hline & \text { Jul } & \text { Aug } & \text { Sep }\\\hline \text { Cash collections } & \$ 50,000 & \$ 40,000 & \$ 48,000 \\\hline \text { Cash payments: } & & & \\\hline \text { Purchases of inventory } & 31,000 & 22,000 & 18,000 \\\hline \text { Operating expenses } & 12,000 & 9,000 & 11,600 \\\hline \text { Capital expenclitures } & 0 & 19,000 & 0 \\\hline\end{array}$

Cash balance at June 30 is projected to be $4,000. The company is required to maintain a minimum cash balance of $5,000 and is authorized to borrow at the end of each month to make up any shortfalls. It may borrow in increments of $5,000 and pays interest monthly at an annual rate of 5%. All financing transactions are assumed to take place at the end of the month. Loan balance should be repaid in increments of $5,000 when there is surplus cash.
Using the format below, please complete the cash budget:
$$\begin{array} { | l | l | l | l | } \hline \text { Cash Budget } & \text { Jul } & \text { Aug } & \text { Sep } \\\hline \text { Beginning cash balance } & & & \\\hline \text { Cash collections } & & & \\\hline \text { Cash available } & & & \\\hline \text { Cash payments: } & & & \\\hline \text { Purchases of inventory } & & & \\\hline \text { Operating expenses } & & & \\\hline \text { Capital expenditures } & & & \\\hline \text { Total cash payments } & & & \\\hline \text { Ending cash balance before financing } & & & \\\hline\\\hline \text { Minimum cash balance desired } & & & \\\hline \text { Cash excess/(deficiency) } & & & \\\hline \text { Financing } & & & \\\hline \text { Borrowing at end of month } & & & \\\hline \text { Principal payments at end of month } & & & \\\hline \text { Interest expense at 5\% } & & & \\\hline \text { Total effects of financing } & & & \\\hline \text { Ending cash balance } & & & \\\hline\end{array}$$