Jamaica Co’s sales forecast for the first five months of 2018 are as follows: January February March April May $ 32,000 $ 36,000 $ 48,000 $ 46,000 $ 55,000 Additional information provided is as follows: (i) Sales for November and December of the previous year were $40,000 and $45,000 respectively. (ii) Sixty percent of sales will be for cash; 30% will be collected in the first month following the sale; and the remaining 10% will be collected in the second month following the sale. (iii) Raw material purchases are settled a month after purchase. Each month’s purchases is shown below: December January February March April $22,400 $25,200 $33,600 $32,200 $38,500 (iv) Wages total $4,200 monthly. (v) Other expenses are $1,800 in January but is expected to increase by $550 each month; (vi) Equipment costing $15,000 will be ordered in January. A deposit of 20% of the cost will be required at the time of the order, with the balance payable at delivery three months later. (vii) Income tax of $7,500 is due in March, at the end of the quarter. (viii) The company’s starting cash balance on January 1 will be $10,000; however, a new minimum balance of $20,000 will be applied going forward. (ix) Short-term credit is arranged at an interest rate of 12 percent per annum (1 percent per month) to be paid monthly. The interest on any short-term borrowing is paid in the month after it is incurred. Required: Prepare Jamaica Co.’s cash budget covering January to April
Jamaica Co’s sales
|
January |
February |
March |
April |
May |
|
$ 32,000 |
$ 36,000 |
$ 48,000 |
$ 46,000 |
$ 55,000 |
Additional information provided is as follows:
(i) Sales for November and December of the previous year were $40,000 and $45,000 respectively.
(ii) Sixty percent of sales will be for cash; 30% will be collected in the first month following the sale; and the remaining 10% will be collected in the second month following the sale.
(iii) Raw material purchases are settled a month after purchase. Each month’s purchases is shown below:
|
December |
January |
February |
March |
April |
|
$22,400 |
$25,200 |
$33,600 |
$32,200 |
$38,500 |
(iv) Wages total $4,200 monthly.
(v) Other expenses are $1,800 in January but is expected to increase by $550 each month;
(vi) Equipment costing $15,000 will be ordered in January. A deposit of 20% of the cost will be required at the time of the order, with the balance payable at delivery three months later.
(vii) Income tax of $7,500 is due in March, at the end of the quarter.
(viii) The company’s starting cash balance on January 1 will be $10,000; however, a new minimum balance of $20,000 will be applied going forward.
(ix) Short-term credit is arranged at an interest rate of 12 percent per annum (1 percent per month) to be paid monthly. The interest on any short-term borrowing is paid in the month after it is incurred.
Required: Prepare Jamaica Co.’s
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