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.

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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