Question

Speedy Medical Supply began October with $ 10,600 cash. Management forecasts that collections from credit customers will be $ 11,400 in October and $ 14,200 in November. The business is scheduled to receive $ 7,000 cash on a business note receivable in October. Projected cash payments include inventory purchases ($ 11,800 in October and $ 13,200 in November) and operating expenses ($ 4,200 each month).
Speedy’s bank requires a $ 10,000 minimum balance in the business’s checking account. At the end of any month when the account balance dips below the minimum balance, the bank automatically extends credit to the business in multiples of $ 1,000. Speedy’s borrows as little as possible and pays back loans in quarterly installments of $ 2,000, plus 3% interest on the entire unpaid principal. The first payment occurs three months after the loan.

Requirement
Prepare Speedy Medical Supply’s cash budget for October and November.



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  • CreatedAugust 27, 2014
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