Question 9 The Hothi Company prepares monthly cash budgets. Relevant data from operating budgets for 2023 are as follows: January February Sales $ 350,000 $ 400,000 Direct materials purchases 120,000 110,000 Selling and administrative expenses 220,000 267,000 Cash balances: The Hothi Company expects its cash balance on January 1, 2023, to be $50,000. It wants to maintain a cash balance of $40,000 by using its line of credit (ignore calculation and repayments of interest). Cash receipts: All sales are on account. The company expects collections to be 50% in the month of sale, 40% in the first month following the sale, and 10% in the second month following the sale. Credit sales: November 2022, $200,000; December 2022, $280,000 Cash disbursements: It pays 30% of direct materials purchases in cash in the month of purchase and the balance due in the month following the purchase. Purchase of direct materials: December 2022, $90,000 Other data are as follows: 1. Other receipts: January – collection of December 31, 2022, notes receivable $5,000; February – proceeds from sale of securities $6,000. 2. Other disbursements: February - payment of $20,000 for land. Required - Prepare a cash budget for the months of January, Feburary and Total for 2023. Hothi Company Cash Budget For the months ended January and February 2023 January February Total

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Question 9

The Hothi Company prepares monthly cash budgets. Relevant data from operating budgets for 2023 are as follows:
				January	February
Sales				$ 350,000	$ 400,000
Direct materials purchases		120,000	110,000
Selling and administrative expenses	220,000	267,000

Cash balances:
The Hothi Company expects its cash balance on January 1, 2023, to be $50,000. It wants to maintain a cash balance of $40,000 by using its line of credit (ignore calculation and repayments of interest).

Cash receipts:
All sales are on account. The company expects collections to be 50% in the month of sale, 40% in the first month following the sale, and 10% in the second month following the sale. Credit sales: November 2022, $200,000; December 2022, $280,000
Cash disbursements:
It pays 30% of direct materials purchases in cash in the month of purchase and the balance due in the month following the purchase. Purchase of direct materials: December 2022, $90,000
Other data are as follows:
1. Other receipts: January – collection of December 31, 2022, notes receivable $5,000; February – proceeds from sale of securities $6,000.
2. Other disbursements: February - payment of $20,000 for land.

Required -

Prepare a cash budget for the months of January, Feburary and Total for 2023.

Hothi Company
Cash Budget
For the months ended January and February 2023
				January	February	Total

Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.

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