Linstead Auto Parts, a family-owned auto parts store, began January with $10,400 cash. Management forecasts that collections
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Linstead Auto Parts’s bank requires a $10,000 minimum balance in the store’s checking account. At the end of any month when the account balance falls below $10,000, the bank automatically extends credit to the store in multiples of $1,000. Linstead Auto Parts borrows as little as possible and pays back loans in quarterly installments of $1,500, plus 3% APR interest on the entire unpaid principal. The first payment occurs three months after the loan.
Requirements
1. Prepare Linstead Auto Parts’s cash budget for January and February.
2. How much cash will Linstead Auto Parts borrow in February if collections from customers that month total $14,500 instead of $15,500? Cash Budget
A cash budget is an estimation of the cash flows for a business over a specific period of time. These cash inflows and outflows include revenues collected, expenses paid, and loans receipts and payment. Its primary purpose is to provide the...
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Related Book For
Horngrens Financial and Managerial Accounting
ISBN: 978-0133866292
5th edition
Authors: Tracie L. Nobles, Brenda L. Mattison, Ella Mae Matsumura
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