Enright Company expects to have a cash balance of $58,170 on January 1, 2014. Th

Question

Enright Company expects to have a cash balance of $58,170 on January 1, 2014. These are the relevant monthly budget data for the first two months of 2014. Collections from customers: January $83,170, February $158,170. Payments to suppliers: January $52,170, February $87,170. Wages: January $30,180, February $40,180. Wages are paid in the month they are incurred. Administrative expenses: January $21,180, February $24,180. These costs include depreciation of $1,000 per month. All other costs are paid as incurred. Selling expenses: January $15,180, February $20,180. These costs are exclusive of depreciation. They are paid as incurred. Sales of short-term investments in January are expected to realize $12,180 in cash. Enright has a line of credit at a local bank that enables it to borrow up to $25,000. The company wants to maintain a minimum monthly cash balance of $32,170. Prepare a cash budget for January and February.

Explanation / Answer

Solution.

Preparetion of cash budget.

Particular January February Opening Balance                58,170                       35,180 ADD :- Collection from Coustmer                83,170                     158,170 Cash avialable              141,340                     193,350 Less:- Payment to suppliers              (52,170)                     (87,170) Wages              (30,180)                     (40,180) Admin . Expense              (20,180)                     (23,180) Selling Expense              (15,180)                     (20,180) Cash avialable                23,630                       22,640 Investment Add:                12,180 Less: Borrow from bank                         9,530 Minimum Cash balance                35,810                       32,170

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