The PINK Company has budgeted sales revenues as follows: Jan Feb March $27,000 18,000 $45,000 $24,000 51,000 $75,000 $18,000 39,000 $57,000 Credit sales Cash sales Total sales Past experience indicates that 60% of the credit sales will be collected in the mouth of sale and the remaining 40% will be collected in the following month. Purchases of inventory are all on credit and 50% is paid in the mouth of purchase and 50% in the month following purchase. Budgeted inventory purchases are: $60,000 45,000 21,000 Jan Feb March Other cash disbursements budgeted: (a) selling and administrative expenses of $7,000 each month, (b) dividends of $20,700 will be paid in Feb, and (c) purchase of a computer in March for $6,000 cash. The company wishes to maintain a minimum cash balance of $10,000 at the end of each month. The company borrows money from the bank at 9% interest if necessary to maintain the minimum cash balance. Borrowed money is repaid in months when there is an excess cash balance. The beginning cash balance on Feb 1 was $10,000. Assume that borrowed money in this case is for one month. Required: Prepare a cash budget for the months of Feb and March.

The PINK Company has budgeted sales revenues as follows: Jan Feb March $27,000 18,000 $45,000 $24,000 51,000 $75,000 $18,000 39,000 $57,000 Credit sales Cash sales Total sales Past experience indicates that 60% of the credit sales will be collected in the mouth of sale and the remaining 40% will be collected in the following month. Purchases of inventory are all on credit and 50% is paid in the mouth of purchase and 50% in the month following purchase. Budgeted inventory purchases are: $60,000 45,000 21,000 Jan Feb March Other cash disbursements budgeted: (a) selling and administrative expenses of $7,000 each month, (b) dividends of $20,700 will be paid in Feb, and (c) purchase of a computer in March for $6,000 cash. The company wishes to maintain a minimum cash balance of $10,000 at the end of each month. The company borrows money from the bank at 9% interest if necessary to maintain the minimum cash balance. Borrowed money is repaid in months when there is an excess cash balance. The beginning cash balance on Feb 1 was $10,000. Assume that borrowed money in this case is for one month. Required: Prepare a cash budget for the months of Feb and March.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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