Question

Zoo Inc. is preparing its cash budget for March. The budgeted beginning cash balance is $27,000. Budgeted cash receipts total $106,000 and budgeted cash disbursements total $93,000. The desired ending cash balance is $65,000. The company can borrow up to $70,000 at any time from a local bank, with interest not due until the following month. Required: Prepare the company's cash budget for March in good form. Make sure to indicate what borrowing, if any, would be needed to attain the desired ending cash balance.

Answer 1

Zoo Inc.

Cash budget for the month of March

Amount in $

Beginning cash balance 27,000

Add:

Cash receipts 106,000

Total cash available 133,000

Less:

Cash disbursements (93,000)

Ending cash balance before borrowing 40,000

Desired ending cash balance 65,000

Cash excess (deficiency) (25,000)

The borrowing required to attain desired ending cash balance is $25,000

Step-by-step explanation:

Cash budget is a forecast of the net cash flows to/from an entity over a given period of time.

Details of the cash budget include the opening cash balance, the expected expenses or outflows of cash, the expected inflows and the closing balance expected as a result of the three (3) items mentioned earlier.