Preparing a financial budget This problem continues the Piedmont Computer Company situation from Chapter 21. Assume Piedmont Computer began January with $15,000 cash. Management forecasts that cash receipts from credit customers will be $48,000 in January and $51,000 in February. Projected cash payments include equipment purchases ($20,000 in January and $41,000 in February) and selling and administrative expenses ($2,000 each month). Piedmont Computer Company’s bank requires a $26,000 minimum balance in the firm’s checking account. At the end of any month when the account balance falls below $26,000, the bank automatically extends credit to the firm in multiples of $5,000. Piedmont Computer Company borrows as little as possible and pays back loans each month in $1,000 increments, plus 12% interest on the entire unpaid principal. The first payment occurs one month after the loan. Requirements Prepare Piedmont Computer Company’s cash budget for January and February 2020. How much cash will Piedmont Computer Company borrow in February if cash receipts from customers that month total $41,000 instead of $51,000?
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.
Preparing a financial budget
This problem continues the Piedmont Computer Company situation from Chapter 21. Assume Piedmont Computer began January with $15,000 cash. Management
Piedmont Computer Company’s bank requires a $26,000 minimum balance in the firm’s checking account. At the end of any month when the account balance falls below $26,000, the bank automatically extends credit to the firm in multiples of $5,000. Piedmont Computer Company borrows as little as possible and pays back loans each month in $1,000 increments, plus 12% interest on the entire unpaid principal. The first payment occurs one month after the loan.
Requirements
- Prepare Piedmont Computer Company’s
cash budget for January and February 2020. - How much cash will Piedmont Computer Company borrow in February if cash receipts from customers that month total $41,000 instead of $51,000?
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