Question

A company is preparing its cash budget. Its cash balance on January 1 is $290,000 and it has a minimum cash requirement of $340,000. The following data has been provided:

Cash receipts

January $1,061,200
February $1,182,400
March $1,091,700

Cash payments

January 984,500
February: 1,210,000
March 1,075,000

What is the amount of cash excess or deficiency (after considering the minimum cash balance required) for March?

Answer 1

Answer:

$16,700 Excess cash

Explanation:

January:

Ending cash balance:

= Opening balance + Cash Receipts - Cash Payments

= $290,000 + $1,061,200 - $984,500

= $366,700

Balance to be maintained = $340,000

Amount of cash excess or deficiency:

= Ending cash balance - Balance to be maintained

= $366,700 - $340,000

= $26,700

February:

Ending cash balance:

= Opening balance + Cash Receipts - Cash Payments

= $366,700 + $1,182,400 - $1,210,000

= $339,100

Balance to be maintained = $340,000

Amount of cash excess or deficiency:

= Ending cash balance - Balance to be maintained

= $339,100 - $340,000

= - $900

March:

Ending cash balance:

= Opening balance + Cash Receipts - Cash Payments

= $340,000 + $1,091,700 - $1,075,000

= $356,700

Balance to be maintained = $340,000

Amount of cash excess or (deficiency):

= Ending cash balance - Balance to be maintained

= $356,700 - $340,000

= $16,700