Cash Budget I

You have been assigned to prepare the cash budget, which is one portion of the master budget for Marble Company.

According to a credit agreement with the companys bank, Marble Company promises to have a minimum cash balance of $50,000 at each months end. In return, the bank has agreed that the company can borrow up to $150,000 at a monthly interest rate of 1%, paid on the last day of each month. The interest is computed based on the beginning balance of the loan for the month. The company repays loan principal with any cash in excess of $50,000 on the last day of each month. The company has a cash balance of $50,000 and a loan balance of $100,000 at January 1.

Marble Co. budgeted the following cash receipts (excluding cash receipts from loans received) and cash payments (excluding cash payments for loan principal and interest payments) for the first three months of next year.

	Cash Receipts	Cash Payments
January	$550,000	$430,000
February	$425,000	$325,000
March	$475,000	$550,000

1. Prepare monthly cash budgets for January, February, and March. (Negative balances and Loan repayment amounts, if any, should be indicated in parentheses ( ).)

2. If the cash receipts and cash payments changed to the values shown ion the table below, how would the budget change?

   Cash Receipts		Cash Payments
   January February March	$350,000 $400,000 $575,000	$430,000 $325,000 $400,000

3. Write a business letter to the CEO analyzing the cash budgets of this company and state your recommendations based on the initial cash receipts and cash payments and on the cash receipts and cash payments changes.