Problem:
I have to prepare a cash budget for a company. Here are the details:
The store's beginning balance is 10,300 in cash. Management forecast that collections from credit customers will be $11,400 in January and $14,800 in February. The store is scheduled to receive $5,000 cash on a business note payable in January. Projected cash payments include inventory purchases ($13,000 in Jjanuary and $13,600 in February) and operating expenses ($2,700 each month). It is required a have a $10,000 minimum balance in the store's checking acct. At the end of any month when the account balance dips below $10,000, the bank automatically extends credit to the store in multiples of $1,000. The store borrows as little as possible and pays back loans in quarterly installments of $2,000, plus 4% interest on the entire unpaid principal. The first payment occurs 3 months after the loan.
Prepare a cash budget for the month of January and February.