Question

Sunland Company expects to have a cash balance of $62,450 on January 1, 2017. These are the relevant monthly budget data for the first two months of 2017.

1.		Collections from customers: January $87,450, February $162,450.
2.		Payments to suppliers: January $56,450, February $91,450.
3.		Wages: January $31,370, February $41,370. Wages are paid in the month they are incurred.
4.		Administrative expenses: January $22,370, February $25,370. These costs include depreciation of $1,000 per month. All other costs are paid as incurred.
5.		Selling expenses: January $16,370, February $21,370. These costs are exclusive of depreciation. They are paid as incurred.
6.		Sales of short-term investments in January are expected to realize $13,370 in cash. Sunland 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 $36,450.

Prepare a cash budget for January and February.

Answer 1

Cash budget :

	January	February
Beginning balance	62450	37710
Cash receipts
Collection from customer	87450	162450
Sale of short term investment	13370
Total cash receipt	100820	162450
Total cash available	163270	200160
Cash disbursement
Payment to supplier	56450	91450
Wages	31370	41370
Administrative expense	21370	24370
Selling expense	16370	21370
Total cash disbursement	125560	178560
excess (deficiency) cash receipt over disbursement	37710	21600
Borrowing (repayment)		14850
Ending cash balance	37710	36450