Answer Happy

6. Jamie, Tiffany, and Celeste have a taco stand at the park. Their bank requires them to maintain a $5,000 minimum cash balance at all times and has provided a line of credit to assist with daily cash flow needs and to maintain the minimum cash balance. The friends' prudent budgeting has predicted a shortfall of $2,590 in January when loyal customers start their annual post-holiday diets. The line of credit bears interest annually at 6% (6% is the annual rate), and funds will be accessed in $100 increments on the first day of the month, for that month's needs. Interest must be paid each month on the outstanding balance (1 month increments), but principal payments are not required each month. The following schedule shows the activity for January and February: 1. Beginning cash balance = $5,100 2. Cash receipts for January = $76,100 and $88,800 for February 3. Cash disbursements for January $83,490 and $79,400 for February 4. Interest = P x R XT Prepare the Cash budget for January and February. February 88,800 January $5,000 76.100 $1,200 83,490 (2,290) Cash Budget Beginning Cash Balance Cash receipts Total cash available Cash disbursements Cash surplus (deficiency) Financing: Proceeds from borrowing Principal repayments Interest payments Ending cash balance: 79.400