Question

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.)

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