Exercise 7-14 Cullumber Company expects to have a cash balance of $58,650 on Jan

Question

Exercise 7-14 Cullumber Company expects to have a cash balance of $58,650 on January 1, 2017. These are the relevant monthly budget data for the first two months of 2017. 1. Collections from customers: January $83,650, February $158,650. 2. Payments to suppliers: January $52,650, February $87,650. 3. Wages: January $31,860, February $41,860. Wages are paid in the month they are incurred. 4. Administrative expenses: January $22,860, February $25,860. These costs include depreciation of $1,000 per month. All other costs are paid as incurred. 5. Selling expenses: January $16,860, February $21,860. These costs are exclusive of depreciation. They are paid as incurred. 6. Sales of short-term investments in January are expected to realize $13,860 in cash. Cullumber Company 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 $32,650. Prepare a cash budget for January and February.

Explanation / Answer

january February A)Opening balance 58650 32930 Add:Cash collection Collection from customers 83650 158650 Sale of short term investments 13860 B)Total cash collection 97510 158650 Less:payments Payments to suppliers 52650 87650 Wages 31860 41860 Administrtive expenses excl depreciation 21860 24860 Selling expenses 16860 21860 C)Total payments 123230 176230 Closing balance A+B-C 32930 15350 Minimum balance to be maintained 32650 32650 Amount to be borrowed from local bank 17300

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