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23 August, 23:15

Zolezzi Inc. is preparing its cash budget for March. The budgeted beginning cash balance is $27,000. Budgeted cash receipts total $104,000 and budgeted cash disbursements total $87,000. The desired ending cash balance is $70,000. The company can borrow up to $90,000 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.

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  1. 24 August, 00:04
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    Zolezzi Inc.

    Cash budget for March

    Amount in $'000

    Opening balance 27

    Add;

    Cash receipts 104

    Less;

    Cash disbursements (87)

    Ending balance 44

    Amount to be borrowed 26

    Desired ending balance 70

    Explanation:

    The cash budget a forecast of the expected movement in cash balance. This is as a result of expected cash receipts and disbursements and may be expressed mathematically as

    opening cash balance + cash receipts - Cash disbursed = closing cash balance

    27 + 104 - 87 = ending balance

    Ending balance = 44

    Desired ending balance = 70

    Amount to be borrowed = 70 - 44

    = 26
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