Franke Co. budgeted the following cash receipts and cash disbursements for the first three months of next year. Cash Receipts Cash Disbursements...
Franke Co. budgeted the following cash receipts and cash disbursements for the first three months of next year.
Cash Receipts Cash Disbursements
January . . . . . . . . . $ 525,000 $ 484,000
February . . . . . . . 411,000 350,000
March . . . . . . . . . 456,000 520,000
According to a credit agreement with the company’s bank, Franke promises to have a minimum cash balance of $ 20,000 at each month- end. In return, the bank has agreed that the company can borrow up to $ 160,000 at an annual interest rate of 12%, paid on the last day of each month. The interest is computed based on the beginning balance of the loan for the month. The company has a cash balance of $ 20,000 and a loan balance of $ 40,000 at January 1. Assume that the company will pay off any and all borrowed amounts (the $40,000 loan) as soon as it is able too. Prepare monthly cash budgets for each of the first three months of next year. Use the template below. (3 points).
| FRANKE COMPANY | |||||
| Cash Budget | |||||
| For January, February, and March | |||||
| January | February | March | |||
| Beginning cash balance | |||||
| Cash receipts | |||||
| =Total cash available | |||||
| Cash disbursements | |||||
| Interest expense: | |||||
| January (Hint: $40,000 x 1%) | ________ | ________ | _______ | ||
| = Preliminary cash balance | | ||||
| Additional loan from bank | |||||
| Repayment of loan to bank(1) | ________ | ________ | ________ | ||
| Ending cash balance | $ | $ | $ | ||
