Whitefish Company budgets its cash two months at a time. Budgeted cash disbursem

Question

Whitefish Company budgets its cash two months at a time. Budgeted cash disbursements for March and April, respectively, are: for inventory purchases, $90,000 and $82,000; for selling and administrative expenses (in- cludes $5,000 depreciation each month), $75,000 and $70,000; for equipment purchases, $15,000 and $6,000; and for dividend payments, $5,000 and $-0-. Budgeted cash collections from customers are $150,000 and $185,000 for March and April, respectively. The company will begin March with a $10,000 cash balance on hand. There should be a minimum cash balance of $5,000 at the end of each month. If needed, the company can borrow money at 12% per year. All borrowings are at the beginning of a month, and all repayments are at the end of a month. Interest is paid only when principal is being repaid. Prepare the cash budget for March and April.

Explanation / Answer

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March April Total Opening Cash Balance 10000 5000 10000 Cash Collections 150000 185000 335000 Total Cash Available 160000 190000 350000 Cash Payments


Inventory Purchases 90000 82000 172000 Selling and administrative expenses 70000 65000 135000 Equipment Purchases 15000 6000 21000 Dividend Payments 5000 0 5000 Total Cash Payments 180000 153000 333000 Cash Surplus/Deficit -20000 37000 12000 Borrowings/Repayments 25000 -25500 -500 Closing Cash Balance 5000 11500 11500

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