Exercise 7-14 Blossom Company expects to have a cash balance of $65,250 on Janua
ID: 2574748 • Letter: E
Question
Exercise 7-14 Blossom Company expects to have a cash balance of $65,250 on January 1, 2017. These are the relevant monthly budget data for the first two months of 2017 1. Collections from customers: January $90,250, February $165,250 2. Payments to suppliers: January $59,250, February $94,250 3. Wages: January $30,780, February $40,780. Wages are paid in the month they are incurred 4. Administrative expenses: January $21,780, February $24,780. These costs include depreciation of $1,000 per month. All other costs are paid as incurred. 5. Selling expenses: January $15,780, February $20,780. These costs are exclusive of depreciation. They are paid as incurred 6. Sales of short-term investments in January are expected to realize $12,780 in cash. Blossom 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 $39,250. Prepare a cash budget for January and February.Explanation / Answer
Cash budget
January
February
Opening balance of cash
65250
41690
cash from sale of short term investment
12780
0
collection from customers
90250
165250
cash available during the month
168280
206940
less expenses
payment to suppliers
59250
94250
wages
30780
40780
administrative expenses
20780
23780
selling expenses
15780
20780
total expenses
126590
179590
cash available during the month
41690
27350
Minimum cash balance
39250
39250
Excess cash balance/ amount to be borrowed
2440
-11900
Cash budget
January
February
Opening balance of cash
65250
41690
cash from sale of short term investment
12780
0
collection from customers
90250
165250
cash available during the month
168280
206940
less expenses
payment to suppliers
59250
94250
wages
30780
40780
administrative expenses
20780
23780
selling expenses
15780
20780
total expenses
126590
179590
cash available during the month
41690
27350
Minimum cash balance
39250
39250
Excess cash balance/ amount to be borrowed
2440
-11900
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