Question

Cullumber Company expects to have a cash balance of $61,650 on January 1, 2017. These are...

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.

Homework Answers

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
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