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ACCT504 Practice Case Study 3 on Cash Budgeting

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Question;ACCT504;Practice Case Study 3 on Cash Budgeting;This is a;practice case study to help you become familiar with how to create a;comprehensive cash budget. The cash budget relates to TCO D and is discussed in;Chapter 7. Your professor will provide the solution by the end of Week 5 in Doc;Sharing.;The actual case;study assignmentshould be uploadedby 11:59 p.m.mountain time on Sunday at the;end of Week 6 to the Week 6 AssignmentDropbox. You are encouraged to use the;Excel template file provided in Doc Sharing.;The Cambridge Company has budgeted sales revenues as follows.;Jan Feb Mar;Credit sales $45,000 $36,000 $27,000;Cash sales 27,000 76,500 58,500;Total sales $72,000 $112,500 $85,500;Past experience indicates that 60% of the credit sales;will be collected in the month of sale and the remaining 40% will be collected;in the following month.;Purchases of inventory are all on credit and 40% is paid;in the month of purchase and 60% in the month following purchase. Budgeted;inventory purchases are $97,500 in January, $67,500 in February, and $31,500 in;March.;Other budgeted cash receipts: (a) sale of plant assets;for $18,525 in February, and (b) sale of new common stock for $25,275 in March.;Other budgeted cash disbursements: (a) operating;expenses of $10,125 each month, (b) selling and administrative expenses of;$18,750 each month, (c) dividends of $28,500 will be paid in February, and (d);purchase of equipment for $9,000 cash in March.;The company has a cash balance of $15,000 at the;beginning of February and wishes to maintain a minimum cash balance of $15,000;at the end of each month. An open line of credit is available at the bank and;carries an annual interest rate of 12%. Assume that all borrowing is done on;the first day of the month in which financing is needed and that all repayments;are made on the last day of the month in which excess cash is available.Also;assume that there is no outstanding financing as of February 1.;Requirements;1. Use this information to prepare a cash budget for the;months of February and March, using the template provided in DocSharing.;Please note: This is not a graded assignment, but your instructor will share the solution for this;practice exercise by the end of Week 5. It is highly recommended that you try;to build the cash budget on your own first.

 

Paper#45294 | Written in 18-Jul-2015

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