Cash Management Hiboux Corporation has the following budgeted schedule for expected cash receipts and cash disbursements.

Hiboux begins July with a cash balance of \(\$ 20,000, \$ 15,000\) of short-term debt, and no shortterm investments. Hiboux uses the following cash management policy:

a. End-of-month cash should equal \(\$ 20,000\) plus the excess of expected disbursements over receipts for the next month.

b. If receipts are expected to exceed disbursements in the next month, the current month ending cash balance should be \(\$ 20,000\).

c. Excess cash should be invested in short-term investments unless there is short-term debt, in which case excess cash should first be used to reduce the debt.

d. Cash deficiencies are met first by selling short-term investments and second by incurring short-term debt.
Required:
1. Calculate the expected buying and selling of short-term investments and the incurrence and repayment of short-term debt at the end of July, August, and September.
2. Discuss the general considerations that help accountants develop a cash management policy.
Case

Transcribed Image Text:

Expected Cash Expected Cash Month Receipts Disbursements July $210,000 $200,000 August 280,000 210,000 September 230,000 190,000 October 160,000 180,000