General Electric Company had cash of $14,000 on hand on January 1. During the year, the company expected the following cash collections from customers by quarter: (06) First Second Third Fourth Cash collections 110,000 177,500 183,700 136,000 Direct materials purchases in tons were budgeted as follows: First Second Third Fourth Direct materials purchase 65,000 75,000 55,000 50,000 The production budget showed the following unit production by quarter with an average labor rate of $40.00: First Second Third Fourth Units to be produced 1,500 2,000 1,700 1,500 General Electric Company planned to pay dividends of $10,000 per quarter during the year. During July, new equipment costing $60,000 will be purchased. An additional $16,000 was planned to installation costs during the fourth quarter. The company was required to maintain a minimum cash balance of $15,000. A line of credit was available for short-term borrowings in increments of $1,000. All borrowings will be made at the beginning of a quarter and repaid at the end of a quarter. Interest on the short-term borrowings will be paid at 0.5% per quarter on the amount repaid in any quarter when a loan repayment is made. All other interest expense will be accrued each quarter. Required: Prepare a cash budget by quarter and for the year in total.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
General Electric Company had cash of $14,000 on hand on January 1. During the year, the company expected the following cash collections from customers by quarter: (06)
First Second Third Fourth
Cash collections 110,000 177,500 183,700 136,000
Direct materials purchases in tons were budgeted as follows:
First Second Third Fourth
Direct materials purchase 65,000 75,000 55,000 50,000
The production budget showed the following unit production by quarter with an average labor rate of $40.00:
First Second Third Fourth
Units to be produced 1,500 2,000 1,700 1,500
General Electric Company planned to pay dividends of $10,000 per quarter during the year. During July, new equipment costing $60,000 will be purchased. An additional $16,000 was planned to installation costs during the fourth quarter.
The company was required to maintain a minimum cash balance of $15,000. A line of credit was available for short-term borrowings in increments of $1,000. All borrowings will be made at the beginning of a quarter and repaid at the end of a quarter. Interest on the short-term borrowings will be paid at 0.5% per quarter on the amount repaid in any quarter when a loan repayment is made. All other interest expense will be accrued each quarter.
Required: Prepare a
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