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##### CDLater's_Cash Budget

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Question;Prepare a monthly cash budget for January;February, and March.;The expected;sales are;January;\$60,000;February;\$55,000;March;\$65,000;April;\$70,000;The?rm expects to collect 10 percent of;sales in cash, 60 percent in one month, and 25 percent in two months with 5;percent in uncollectible bad debts. Sales for the previous November and December;were \$55,000 and \$80,000, respectively.;The?rm buys raw materials thirty days;prior to expected sales, that is, the materials for January are bought by the;beginning of December with payment made by the end of December. Materials costs;are 58 percent of sales.;Wages for the months of January, February;and March are expected to be \$6,000 per month. Other monthly expenses amount to;\$5,000 a month and are paid in cash each month. Taxes due for an earlier;quarter are paid in the second month of the succeeding quarter. The taxes due;for the prior quarter were \$9,000.;The?rm plans to buy a new car in January;for \$18,000. An old vehicle will be sold for a net amount of \$2,000. A note of;\$10,000 will be due for payment in February. A quarterly loan installment;payment of \$7,500 is due in March.;The beginning cash balance in January is;\$8,000. The company policy is to maintain a minimum cash balance of \$5,000. It;has an outstanding loan balance of \$10,000 in December. Should the?rm need to;borrow to meet expected monthly shortfalls, the interest cost is 1.5 percent;per month and is paid each month on the total amount of borrowed funds;outstanding at the end of the previous month.

Paper#37227 | Written in 18-Jul-2015

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