Mini-Case 13-3: Rent-A-Nerd Computer Consultants
The owners of Rent-A-Nerd Computer Consultants have prepared the partial cash budget for the upcoming quarter:
CASH BUDGET - RENT-A-NERD COMPUTER CONSULTANTS
Month 1 Month 2 Month 3
Cash Receipts
Total Sales $42,650 $45,500 $47,000
Credit Sales 25,590 27,300 28,200
Collections
10 percent same month 2,559 2,730 2,820
80 percent next month 19,941 20,472 21,840
8 percent following month 1,864 1,994 2,048
Cash Sales $17,060 $18,200 $18,800
Total Cash Receipts ________ ________ ________
Cash Disbursements
Purchases $32,404 $33,267 $35,490
Wages/Salaries 4,212 4,897 5,126
Rent/Utilities 1,865 1,910 2,250
Other 2,400 3,750 6,105
Total Cash Disbursements ________ ________ ________
End of Month Balance
Beginning Cash $4,750 ________ ________
Cash Receipts ________ ________ ________
Cash Disbursement ________ ________ ________
EOM Balance ________ ________ ________
Borrow ________ ________ ________
Repay ________ ________ ________
Calculate the final end-of-month balance for months 1-3 and answer the following questions.
-How much would Rent-A-Nerd have to borrow if its desired minimum cash balance is $4,000?
A)$2,224 in Month 3
B)Nothing. Rent-A-Nerd's end of the month cash balance is below $4,000.
C)$2,598 in Month 3
D)$20,771 in Month 3

Question

Quizplus · Accepted Answer

The end-of-month balance for Month 3 is calculated by adding the beginning cash, total cash receipts, and subtracting total cash disbursements. If the balance is below the desired minimum of $4,000, Rent-A-Nerd would need to borrow the difference to meet this minimum. The correct calculation shows a need to borrow $2,598 in Month 3 to maintain the minimum balance.