Colorado Farm Supply is preparing their budget for the next two quarters. The company requires a minimum cash balance of at least $6,000 at the end of each quarter.

The company can barrow money at the beginning of each quarter from their local bank in increments of $1,000 at an interest rate of 2% per quarter. The bank requires cash interest payment at the end of each quarter until the principal is repaid.

First Quarter Second Quarter

Cash balance, beginning 8,000 ?

Cash collection from customers 67,000 80,000

Cash Disbursments:

Purchase of Inventory 53,000 66,000

Selling and administrative expenses 26,000 28,000

What is the ending cash balance for the first quarter?

The answer is $6,780