Question

Sheridan Company expects to have a cash balance of $105,800 on January 1, 2022. These are...

Sheridan Company expects to have a cash balance of $105,800 on January 1, 2022. These are the relevant monthly budget data for the first two months of 2022. 1. Collections from customers: January $163,300, February $335,800. 2. Payments to suppliers: January $92,000, February $172,500. 3. Wages: January $69,000, February $92,000. Wages are paid in the month they are incurred. 4. Administrative expenses: January $48,300, February $55,200. These costs include depreciation of $2,300 per month. All other costs are paid as incurred. 5. Selling expenses: January $34,500, February $46,000. These costs are exclusive of depreciation. They are paid as incurred. 6. Sales of short-term investments in January are expected to realize $27,600 in cash. Sheridan Company has a line of credit at a local bank that enables it to borrow up to $57,500. The company wants to maintain a minimum monthly cash balance of $46,000.

Prepare a cash budget for January and February. (List items that increase cash balance first.)

Homework Answers

Answer #1

Solution

Cash Budget
January February
Beginning Cash Balance $1,05,800 $55,200
Add: Cash Receipts
collection from customers $1,63,300 $3,35,800
Collection from sale of marketable securities $27,600 $0
Total cas receipts $1,90,900 $3,35,800
Total cash Available $2,96,700 $3,91,000
Less: Cash Disbursement
Cash Payment to suppliers $92,000 $1,72,500
Cash Payment for wages $69,000 $92,000
Manufacturing overhead $46,000 $52,900
Selling and adm. Expense $34,500 $46,000
Total Cash disbursements $2,41,500 $3,63,400
Surplus (deficiency) of cash $55,200 $27,600
Financing:
Add: borrowings $0 $18,400
Less: Repayments $0 $0
Ending Cash Balance $55,200 $46,000
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