Assume that this cash budget has a minimum balance of $10,000 With the following information about Quantum Plastics Ltd., prepare a cash budgetfor the months of January to April 2014.The marketing department's sales forecast follows:November (2013)DecemberJanuary (2014)FebruaryMarchAprilThe credit manager provides the following information:20% of sales are on a cash basis.$ 25,00050,00075,000120,000140,000110,00060% are collected after 30 days.20% are collected after 60 days.Cost of sales, which is 50% of sales, is incurred in the month in which the sales aremade. These goods are paid for 30 days after the purchases are made.Monthly selling and administrative expenses are as follows:SalariesTelephoneAmortizationRentHydroStationery$22,0001,0005002,2001,100500Other expenses are as follows:Taxes: $3,000 in February and $3,000 in June.Purchase of equipment in January for $24,000.The cash balance on January 1, 2014 is $12,000.

Cash budget is the statement which is prepared by the entity for the purpose of estimating the…

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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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Assume that this cash budget has a minimum balance of $10,000

With the following information about Quantum Plastics Ltd., prepare a cash budget
for the months of January to April 2014.
The marketing department's sales forecast follows:
November (2013)
December
January (2014)
February
March
April
The credit manager provides the following information:
20% of sales are on a cash basis.
$ 25,000
50,000
75,000
120,000
140,000
110,000
60% are collected after 30 days.
20% are collected after 60 days.
Cost of sales, which is 50% of sales, is incurred in the month in which the sales are
made. These goods are paid for 30 days after the purchases are made.
Monthly selling and administrative expenses are as follows:
Salaries
Telephone
Amortization
Rent
Hydro
Stationery
$22,000
1,000
500
2,200
1,100
500
Other expenses are as follows:
Taxes: $3,000 in February and $3,000 in June.
Purchase of equipment in January for $24,000.
The cash balance on January 1, 2014 is $12,000.

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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