Prepare a cash budget for Atlas Products, Inc. for the first year of 20X2, based on the following information. The budgeting section of the corporate finance department of Atlas Products has received the following sales estimates from the marketing department:   Total Sales                           Credit Sales December 20X1                                           $825,000                               $770,000 January 20X2                                               730,000                                 690,000 February 20X2                                             840,000                                 780,000 March 20X2                                                  920,000                                 855,000   The company has found that, on average, about 25 percent of its credit sales are collected during the month when the sale is made, and the remaining 75 percent of credit sales are collected during the month following the sale. As a result, the company uses these figures for budgeting.   The company estimates its purchases at 60 percent of next month’s sales, and payment for those purchases are budgeted to lag the purchases by 1 month. Various disbursements have been estimated as follows:   January                     February                   March Wages and salaries                         $250,000                   $290,000                   $290,000 Rent                                                    27,000                        27,000                        27,000 Other expenses                                10,000                        12,000                        14,000   In addition, a tax payment of $105,000 is due on January 15, and $40,000 in dividends will be declared in January and paid in March. Also, the company has ordered a $75,000 piece of equipment. Delivery is scheduled for early January; and payment will be due in February. The company’s projected cash balance at the beginning of January is $100,000, and the company desires to maintain a balance of $100,000 at the end of each month.

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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  1. Prepare a cash budget for Atlas Products, Inc. for the first year of 20X2, based on

the following information.

The budgeting section of the corporate finance department of Atlas Products has received the following sales estimates from the marketing department:

 

Total Sales                           Credit Sales

December 20X1                                           $825,000                               $770,000

January 20X2                                               730,000                                 690,000

February 20X2                                             840,000                                 780,000

March 20X2                                                  920,000                                 855,000

 

The company has found that, on average, about 25 percent of its credit sales are collected during the month when the sale is made, and the remaining 75 percent of credit sales are collected during the month following the sale. As a result, the company uses these figures for budgeting.

 

The company estimates its purchases at 60 percent of next month’s sales, and payment

for those purchases are budgeted to lag the purchases by 1 month.

Various disbursements have been estimated as follows:

 

January                     February                   March

Wages and salaries                         $250,000                   $290,000                   $290,000

Rent                                                    27,000                        27,000                        27,000

Other expenses                                10,000                        12,000                        14,000

 

In addition, a tax payment of $105,000 is due on January 15, and $40,000 in dividends will be declared in January and paid in March. Also, the company has ordered a $75,000 piece of equipment. Delivery is scheduled for early January; and payment will be due in February.

The company’s projected cash balance at the beginning of January is $100,000, and the company desires to maintain a balance of $100,000 at the end of each month.

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