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Annual general and administrative costs are $1,411,200 and are
incurred evenly throughout the year.
Annual property taxes are $14,000 and are paid semi annually in June
and October.
A $10,000 cash capital purchase will be made in April.
The beginning cash balance in April is expected to be $47,000. The
Hale Company has a policy of maintaining a minimum cash balance
of $45,000. The company has an arrangement with a local bank for a
line of credit that carries a 10% annual interest rate. If the ending
monthly balance falls below $45,000, the company will borrow
against the line of credit so that the minimum balance can be
maintained. If the company has borrowed against the line of credit
and a cash balance is expected to be above $45,000 at the end of a
particular month, then repayments will be made bringing the cash
balance down to $45,000. Interest on the line of credit is paid
monthly. Assume that all line of credit transactions occur on the last
day of the month.
Required:
Prepare a cash budget for the Hale Company for the 2nd quarter of the
year. Include April, May, June, and a quarter total in your budget.
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ACCT 556 Week 6 Homework Problem
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