Preparing the financial budget—cash budget Hoppy Company requires a minimum cash balance of $3,500. When the company expects a cash deficiency, it borrows the exact amount required on the first of the month. Expected excess cash is used to repay any amounts owed. Interest owed from the previous month’s principal balance is paid on the first of the month at 14% per year. The company has already completed the budgeting process for the first quarter for cash receipts and cash payments for all expenses except interest. Hoppy does not have any outstanding debt on January 1. Complete the cash budget for the first quarter for Hoppy Company. Round interest expense to the nearest whole dollar.

HOPPY COMPANY

Cash Budget

For the three months ended March 31

Particulars

January

February

March

Total

Beginning cash balance

$3,500

$3,500

$3,500

$3,500

Cash receipts

$19,000

$27,500

$42,000

$88,500

Cash available

$22,500

$31,000

$45,500

$99,000

Cash payments:

All expenses except interest

$34,000

$35,000

$39,000

$108,000

Interest Expense

$0

$175

$265

$440

Total cash payments

$34,000

$35,175

$39,265

$108,440

Ending cash balance before financing

($11,500)

(4,175)

$6,235

($9,440)

Minimum cash balance desired

($3,500)

($3,500)

($3,500)

($3,500)

Projected cash excess (deficiency)

($15,000)

($7,675)

$2,735

($29,380)

Financing

borrowing

$15,000

$7,675

$0

$22,675

Principal repayments

$0

$0

$2,735

($2,735)

Total effects of financing

$15,000

$7,675

$2,735

$19,940

Ending cash balance

$3,500

$3,500

$3,500

$3,500