The Following Budget Estimates Have Been Prepared by Clifton Company

question 26

Essay

The following budget estimates have been prepared by Clifton Company:
The company likes to maintain a minimum cash balance of £40,000.
Any excess cash is invested in a money market account earning 9 percent compounded monthly. Interest is reinvested in the money market account. Any cash deficiencies are covered by a withdrawal from the money market account. If additional cash is needed, the company has a line of credit at 12 percent interest with the local bank. Interest is paid monthly.
Assume a cash balance on May 1 of £40,000, a money market account balance of £0, and a credit line loan balance of £0.
Required:
Prepare a cash budget for May and June.

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