Question

Cullumber Company expects to have a cash balance of $61,650 on January 1, 2017. These are the relevant monthly budget data for the first two months of 2017.

1.		Collections from customers: January $86,650, February $161,650.
2.		Payments to suppliers: January $55,650, February $90,650.
3.		Wages: January $30,490, February $40,490. Wages are paid in the month they are incurred.
4.		Administrative expenses: January $21,490, February $24,490. These costs include depreciation of $1,000 per month. All other costs are paid as incurred.
5.		Selling expenses: January $15,490, February $20,490. These costs are exclusive of depreciation. They are paid as incurred.
6.		Sales of short-term investments in January are expected to realize $12,490 in cash. Cullumber 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 $35,650.

Prepare a cash budget for January and February.

Answer 1

The cash budget for two months is shown as follows:-

Cullumber Company

Cash Budget

For the month of January and February (Amounts in $)

Particulars	January	February
Beginning Balance (A)	61,650	43,670
Add: Cash Receipts
Collections from customers	86,650	161,650
Sale of Marketable securities	12,490	0
Total Cash Receipts (B)	99,140	161,650
Total Cash Available (C = A+B)	160,790	205,320
Less: Cash Disbursements
Payments to suppliers	50,650	90,650
Wages paid	30,490	40,490
Administrative Expenses Paid (exluding depreciation $1,000)	20,490	23,490
Selling Expenses	15,490	20,490
Total Cash Disbursements (D)	117,120	175,120
Excess or (Deficiency) of cash ( E = C - D)	43,670	30,200
Financing:
Add: Borrowings	0	5,450 ($35,650 minimum bal - $30,200)
Less: Repayments	0	0
Closing Cash Balance	43,670	35,650