Question

Roche City has two major sources of revenue; sales taxes and property taxes. The state collects the sales tax revenues and will transfer $230,000 cash to the city on March 1, 2018 for the sales tax revenues earned in the last quarter of 2017. Property tax bills were sent to property owners of Roche City in September 2017. The total amount due to Roche City is $45,000,000. Traditionally, property tax revenues have been received in cash according to the following schedule

40 percent of the total is paid in the first month following the billing date.

20 percent of the total is paid in the second month.

10 percent of the total is paid in the third month.

10 percent of the total is paid in the fourth month.

8 percent of the total is paid in the fifth month.

5 percent of the total is paid in the sixth month.

7 percent is not collected.

Roche City is not planning any capital asset purchases during the first three months of 2015. Monthly cash disbursements for general operations are $3,700,000. Beginning cash balance for January 1, 2018 is $500,000. Roche City will borrow to ensure that the ending cash balance each month is at least $100,000. A template of a Cash Budget is shown below.

Roche City Monthly Cash Budget First Three Months of 2018
		January	February	March
	Beginning Balance	$500,000	?	?
	Cash Receipts
	Property tax	?	?	?
	Sales Tax	?	?	?
	Total Cash Available	?	?	?
	Less Cash Disbursements	3,700,000	3,700,000	3,700,000
	Net Cash Available	?	?	?
	Borrow/(repay)	$0	?	?
	Ending Cash Balance	?	?	?

Answer 1

THere only 2 sources for the city - sales tax and property tax. We are given that for the sales tax, an amount of $ 230,000 will be transferred to the city from state on March 1, 2018. For the property tax, as per the collection schedule the city will collect (of the $45000000 tax) in January (10%), February (8%) and March (5%). Thus the monthly property taxes for these 3 months will be:

January : 10% * 45000000 = $ 4,500,000

February : 8% * 45000000 = $ 3,600,000

March : 5% * 45000000 = $ 2,250,000

The cash budget will look like as below: