McIntyre,Inc.has prepared its third quarter budget and provided the following data: $$\begin{array} { | l | r | r | r | }
\hline & { \text { Jul } } & { \text { Aug } } & { \text { Sep } } \
\hline \text { Cash collections } & \$ 51,000 & \$ 39,600 & \$ 47,700 \
\hline \text { Cash payments: } & & & \
\hline \text { Purchases of direct materials } & 30,000 & 21,700 & 17,300 \
\hline \text { Operating expenses } & 12,300 & 8,800 & 11,400 \
\hline \text { Capital expenditures } & 13,800 & 24,100 & 0 \
\hline
\end{array}$$ The cash balance on June 30 is projected to be $4,300.The company has to maintain a minimum cash balance of $5,000 and is authorized to borrow at the end of each month to make up any shortfalls.It may borrow in increments of $5,000 and has to pay interest every month at an annual rate of 4%.All financing transactions are assumed to take place at the end of the month.The loan balance should be repaid in increments of $5,000 whenever there is surplus cash.Calculate the final projected cash balance at the end of August taking into consideration all the financing transactions.
A) $9,167
B) $(5,833)
C) $48,800
D) $15,000

Question

McIntyre,Inc.has prepared its third quarter budget and provided the following data: $$\begin{array} { | l | r | r | r | } 
\hline & { \text { Jul } } & { \text { Aug } } & { \text { Sep } } \
\hline \text { Cash collections } & \$ 51,000 & \$ 39,600 & \$ 47,700 \
\hline \text { Cash payments: } & & & \
\hline \text { Purchases of direct materials } & 30,000 & 21,700 & 17,300 \
\hline \text { Operating expenses } & 12,300 & 8,800 & 11,400 \
\hline \text { Capital expenditures } & 13,800 & 24,100 & 0 \
\hline
\end{array}$$ The cash balance on June 30 is projected to be $4,300.The company has to maintain a minimum cash balance of $5,000 and is authorized to borrow at the end of each month to make up any shortfalls.It may borrow in increments of $5,000 and has to pay interest every month at an annual rate of 4%.All financing transactions are assumed to take place at the end of the month.The loan balance should be repaid in increments of $5,000 whenever there is surplus cash.Calculate the final projected cash balance at the end of August taking into consideration all the financing transactions.
A) $9,167
B) $(5,833)
C) $48,800
D) $15,000

Quizplus · Accepted Answer

The cash balance at the end of August is calculated by considering the cash collections, cash payments, and any borrowing or repayment needed to maintain the minimum cash balance. Starting with $4,300, add July's net cash flow (collections minus payments) and adjust for borrowing to maintain the minimum balance. Repeat for August, considering interest on any borrowed amount. The final balance is $9,167.

McIntyre,Inc The Cash Balance on June 30 Is Projected to Be