Scribd Logo
Upload

Welcome to Scribd!

  • 22 views

    Illustrative Problem On Cash Budget: ST ND RD TH

    Uploaded by

    Jean Kathyrine Chiong
    The Coventrade Corp. provided cash budget information for the next year including quarterly cash disbursements, net cash from operations, and other cash flows. To prepare the cash budget, the minimum cash balance required is 40% of the next quarter's operational needs. Excess cash over this minimum can be invested in commercial paper or bank loans. The cash budget shows the projected cash balances and cash flows for each quarter and supports the company having sufficient cash for operations through the year.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    Illustrative Problem On Cash Budget: ST ND RD TH

    Uploaded by

    Jean Kathyrine Chiong
    22 views3 pages
    The Coventrade Corp. provided cash budget information for the next year including quarterly cash disbursements, net cash from operations, and other cash flows. To prepare the cash budget, the minimum cash balance required is 40% of the next quarter's operational needs. Excess cash over this minimum can be invested in commercial paper or bank loans. The cash budget shows the projected cash balances and cash flows for each quarter and supports the company having sufficient cash for operations through the year.

    Original Description:

    BSA

    Original Title

    84

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The Coventrade Corp. provided cash budget information for the next year including quarterly cash disbursements, net cash from operations, and other cash flows. To prepare the cash budget, the minimum cash balance required is 40% of the next quarter's operational needs. Excess cash over this minimum can be invested in commercial paper or bank loans. The cash budget shows the projected cash balances and cash flows for each quarter and supports the company having sufficient cash for operations through the year.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    22 views3 pages

    Illustrative Problem On Cash Budget: ST ND RD TH

    Uploaded by

    Jean Kathyrine Chiong
    The Coventrade Corp. provided cash budget information for the next year including quarterly cash disbursements, net cash from operations, and other cash flows. To prepare the cash budget, the minimum cash balance required is 40% of the next quarter's operational needs. Excess cash over this minimum can be invested in commercial paper or bank loans. The cash budget shows the projected cash balances and cash flows for each quarter and supports the company having sufficient cash for operations through the year.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    You are on page 1of 3

    ILLUSTRATIVE PROBLEM ON CASH BUDGET

    The COVENTRADE CORP. has sought your assistance in preparing its cash budget for next year’s
    operations and provides you with the following information:

    1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

    Budgeted Cash Disbursement P 190,000 300,000 200,000 250,000


    for operation

    Budgeted Net Cash from 60,000 130,000 200,000 250,000


    operations

    Purchase of Land (150,000)

    Sale of Building 80,000

    Dividends (130,000)

    Redemption of Bonds (200,000)

    The corporation has adopted the policy of requiring a minimum cash balance equal to 40% of
    the succeeding quarter’s requirements for operations. Beginning cash balance is P 60,000 and desired
    year-end balance is P 15,000.

    One year 15% bank loans may be obtained (in multiples of P 5,000) at the start of the quarter
    with interest payable at the end of the same period. In case the cash balance exceeds 160% of the
    required minimum balance, the difference (in multiples of P 50,000) may be placed in commercial
    papers (qualified as cash equivalents) at the start of the succeeding quarter to earn a minimum of 12%
    per annum with interest collectible at the end of the quarter.

    Required: Cash budget with supporting schedule.


    SOLUTION:
    1st Quarter 2nd Quarter 3rd Quarter 4th Quarter FOR
    THIS YEAR

    Budgeted Cash P 250,000 430,000 400,000 500,000 1,580,000


    Receipt

    Budgeted Cash
    Disbursement (190,000) (300,000) (200,000) (250,000) (940,000)

    Budgeted Net Cash 60,000 130,000 200,000 250,000 640,000


    from operations

    Purchase of Land (150,000) (150,000)

    Sale of Building 80,000 80,000

    Dividends (130,000) (130,000)

    Redemption of bonds (200,000) (200,000)

    Net Cash Inflow 60,000 130,000 (80,000) 130,000 240,000

    Cash balance, beg. 60,000 120,000 250,000 173,000 60,000

    REQUIRED MINIMUM (120,000) (80,000) (100,000) (150,000) (150,000)


    CASH BALANCE

    CASH EXCESS -0- 170,000 70,000 153,000 150,000


    (deficiency)

    Bank Loans obtained -0- -0- -0- -0- -0-

    Interest on
    commercial -0- -0- 3,000 -0- 3,000
    (schedule A)

    Cash in excess
    of required minimum -0- 170,000 73,000 153,000 153,000
    balance

    Cash balance, end 120,000 250,000 173,000 303,000 303,000


    Schedule A: Commercial paper placement and interest

    Minimum required 120,000 80,000 100,000 150,000


    Cash balance

    Multiple by: 160% 160% 160% 160%

    Total 192,000 128,000 160,000 240,000

    Less:
    Cash balance, end (120,000) 250,000 173,000 303,000

    DIFFERENCE (DEFICIT) (72,000) 122,000* 13,000 63,000

    COMMERCIAL PAPER
    PLACEMENT IN CPs 100,000

    Interest received 2 + 12% 3,000

    *Excess cash balance, end

    You might also like