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.

Question

Delacruz

Business

2 July, 00:01

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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Tristian Barker · Answer 1

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