A3+ Has Prepared Its Third Quarter Budget and Provided the Following

question 101

Multiple Choice

A3+ has prepared its third quarter budget and provided the following data:
$$\begin{array} { | l | l | l | l | } \hline & { \text { Jul } } & { \text { Aug } } & { \text { Sep } } \\\hline \text { Cash collections } & \$ 49,000 & \$ 39,900 & \$ 47,600 \\\hline \text { Cash payments } & & & \\\hline \text { Purchases of inventory } & 29,000 & 21,700 & 17,700 \\\hline \text { Operating expenses } & 12,400 & 9100 & 11,400 \\\hline \text { Capital expenditures } & 13,200 & 24,300 &0 \\\hline\end{array}$$
The cash balance on 30 June is projected to be $4200.The company has to maintain a minimum cash balance of $5,000 and is authorised 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 4%.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 projected cash balance at the end of September.

• A) $21,867
• B) $55,967
• C) $6784
• D) $8367

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Definitions:

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