Budget in Service Company (Cash Budget)Edge Soccer Program (Edge) began the year with a cash balance of $10,500. The budgetforecasts that collections from customers owed to the company will be $11,000 in January and$15,200 in February. The soccer program is also supposed to receive $8,500 in January on a notereceivable from a soccer club that owes Edge for training.Edge plans to purchase soccer equipment in January and February with cash. Thebudgeted amounts of the purchases are $15,600 in January and $14,800 in February. Operatingcosts for the business is $2900 per month.Edge must maintain a minimum cash balance of $10,000 in their bank account at alltimes. If the amount in the bank account falls below $10,000, then bank extends credit to Edgeimmediately in multiples of $1000. Edge pays back any amounts borrowed each quarter inpayments of $2000 plus 4% interest. The first payment occurs three (3) months after the bankhas extended edge credit.RequirementPrepare a cash budget for January and February.

A cash budget is a forecast of cash inflows and outflows from the business. It's very beneficial to…

Answered: Budget in Service Company (Cash Budget)…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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At the beginning of the school year, Katherine Malloy decided to prepare a cash budget for the months of September, October, November, and December. The budget must plan for enough cash on December 31 to pay the spring semester tuition, which is the same as the fall tuition. The following information relates to the budget: Cash balance, September 1 (from a summer job) $9,060 Purchase season football tickets in September 120 Additional entertainment for each month 310 Pay fall semester tuition in September 4,900 Pay rent at the beginning of each month 440 Pay for food each month 250 Pay apartment deposit on September 2 (to be returned December 15) 600 Part-time job earnings each month (net of taxes) 1,120 a. Prepare a cash budget for September, October, November, and December. Enter all amounts as positive values except an overall cash decrease which should be indicated with a minus sign. KATHERINE MALLOYCash BudgetFor the Four Months Ending December 31…
Kayak Company budgeted the following cash receipts (excluding cash receipts from loans received) and cash payments excluding cash payments for loan principal and interest payments) for the first three months of next year. January February March Cash Receipts $ 521,000 410,500 480,000 Cash payments $ 467,800 357,300 528,000 Kayak requires a minimum cash balance of $30,000 at each month-end. Loans taken to meet this requirement charge 1%, interest per month, paid at each month-end. The interest is computed based on the beginning balance of the loan for the month. Any preliminary cash balance above $30,000 is used to repay loans at month-end. The company has a cash balance of $30,000 and a loan balance of $60,000 at January 1. Prepare monthly cash budgets for January, February, and March. Note: Negative balances and Loan repayment amounts (if any) should be indicated with minus sign. Beginning cash balance Add: Cash receipts Total cash available KAYAK COMPANY Cash Budget January $ 30,000…
Garden Sales, Incorporated, sells garden supplies. Management is planning its cash needs for the second quarter. The company usually has to borrow money during this quarter to support peak sales of lawn care equipment, which occur during May. The following information has been assembled to assist in preparing a cash budget for the quarter: Budgeted monthly absorption costing income statements for April–July are: April May June July Sales $ 690,000 $ 860,000 $ 570,000 $ 470,000 Cost of goods sold 483,000 602,000 399,000 329,000 Gross margin 207,000 258,000 171,000 141,000 Selling and administrative expenses: Selling expense 87,000 106,000 68,000 47,000 Administrative expense* 48,500 65,600 42,200 45,000 Total selling and administrative expenses 135,500 171,600 110,200 92,000 Net operating income $ 71,500 $ 86,400 $ 60,800 $ 49,000 *Includes $29,000 of depreciation each month. Sales are 20% for cash and 80% on account. Sales on account are…
At the beginning of the school year, Craig Kovar decided to prepare a cash budget for the months of September, October, November, and December. The budget must plan for enough cash on December 31 to pay the spring semester tuition, which is the same as the fall tuition. The following information relates to the budget: Cash balance, September 1 (from a summer job) $8,900 Purchase season football tickets in September 190 Additional entertainment for each month 290 Pay fall semester tuition in September 4,600 Pay rent at the beginning of each month 700 Pay for food each month 640 Pay apartment deposit on September 2 (to be returned December 15) 700 Part-time job earnings each month (net of taxes) 1,400 This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. a. Prepare a cash budget for September, October, November, and December. Enter all amounts as…
The company provides the following information regarding the cash budget for next year: Quarter 1 Quarter 2 Quarter 3 Quarter 4 Beginning cash balance $5,000 $5,000 $5,000 $5,000 Excess (Deficiency) ($3,000) $2,000 ($2,500) $1,000 The company's policy is to start each quarter with a cash balance of $5,000.The company has access to a line of credit in the amount of $50,000 for any short term borrowing needs and pays the loans off as quickly as possible.The company assumes the cash budget for the year will begins with no loans.What is the expected loan balance at the end of Quarter 2 (ignore interest)?
The controller of Mercury Shoes Inc. instructs you to prepare a monthly cash budget for the next three months. You are presented with the following budget information: Sales/Costs Sales Manufacturing costs Selling and admin. expenses Capital expenses April May June $150,000 $175,000 $195,000 66,000 87,000 115,000 40,000 46,000 51,000 0 0 120,000 The company expects to sell about 15% of its merchandise for cash. Of sales on account, 70% are expected to be collected in the month following the sale and the remainder the following month (second month after sale). Depreciation, insurance, and property tax expense represent $12,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in December, and the annual property taxes are paid in September. Of the remainder of the manufacturing costs, 80% are expected to be paid in the month in which they are incurred and the balance in the following month. Current assets as of April 1 include cash of $42,000, marketable…
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Garden Depot is a retailer that is preparing its budget for the upcoming fiscal year. Management has prepared the following summary of its budgeted cash flows: Total cash receipts Total cash disbursements 1st Quarter $ 210,000 $ 281,000 The company's beginning cash balance for the upcoming fiscal year will be $26,000. The company requires a minimum cash balance of $10,000 and may borrow any amount needed from a local bank at a quarterly interest rate of 3%. The company may borrow any amount at the beginning of any quarter and may repay its loans, or any part of its loans, at the end of any quarter. Interest payments are due on any principal at the time it is repaid. For simplicity, assume that interest is not compounded. Beginning cash balance Total cash receipts Total cash available Total cash disbursements Excess (deficiency) of cash available over disbursements Financing: Borrowings Repayments Interest Required: Prepare the company's cash budget for the upcoming fiscal year.…

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