A3+ Has Prepared Its 3rd Quarter Budget and Provided the Following

question 83

Multiple Choice

A3+ has prepared its 3rd quarter budget and provided the following data: $\begin{array}{|l|r|r|r|} \hline& {\text { Jul }} &{\text { Aug }} &{\text { Sep }} \\\hline \text { Cash collections } & \$ 50,000 & \$ 40,000 & \$ 48,000 \\\hline \text { Cash payments: } & & & \\\hline \text { Purchases of inventory } & 31,000 & 22,000 & 18,000 \\\hline \text { Operating expenses } & 12,000 & 9,000 & 11,600 \\\hline \text { Capital expenditures } & 13,000 & 25,000 & 0\\\hline\end{array}$ The cash balance on June 30 is projected to be $4,000. 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 5%. 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 cash balance at the end of August taking into consideration all the financing transactions.

• A) $6,958
• B) $5,254
• C) $7,100
• D) $4,320