Question

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.

Answer 1