Question

Ivanhoe Company expects to have a cash balance of $56,450 on January 1, 2017. These are...

Ivanhoe Company expects to have a cash balance of $56,450 on January 1, 2017. These are the relevant monthly budget data for the first two months of 2017.

1. Collections from customers: January $81,450, February $156,450.
2. Payments to suppliers: January $50,450, February $85,450.
3. Wages: January $31,980, February $41,980. Wages are paid in the month they are incurred.
4. Administrative expenses: January $22,980, February $25,980. These costs include depreciation of $1,000 per month. All other costs are paid as incurred.
5. Selling expenses: January $16,980, February $21,980. These costs are exclusive of depreciation. They are paid as incurred.
6. Sales of short-term investments in January are expected to realize $13,980 in cash. Ivanhoe Company has a line of credit at a local bank that enables it to borrow up to $25,000. The company wants to maintain a minimum monthly cash balance of $30,450.


Prepare a cash budget for January and February.

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