Question: CDLater\'s projected sales for the first four month of 201x are: The f

Question

Question:

CDLater's projected sales for the first four month of 201x are:

The firm expects to collect 10 percent of sales in cash, 60 percent in one month, and 25 percent in two months with 5 percent in uncollectible bad debts. Sales for the previous November and December were $55,000 and $80,000, respectively. The firm buys raw materials 30 days prior to expected sales; that is, the materials for January are bought by the beginning of December with payment made by the end of December. Materials cost are 58 percent of sales. Wages for the months of January, February, and March are expected to be $6,000 per month. Other monthly expenses amount to $5,000 a month and are paid in the second month of the succeeding quarter. The taxes due for the prior quarter were $9,000.
The firm plans to buy a new car in January for $18,000. An old vehicle will be sold for a net amount of $2,000. A note of $10,000 will be due for payment in February. A quarterly loan installment payment of $7,500 is due in March. The beginning cash balance in January is $8,000. The company policy is to maintain a minimum cash balance of $5,000. It has an outstanding loan balance of $10,000 in December. Should the firm need to borrow to meet expected monthly shortfalls, the interest cost is 1.5 percent per month and is paid each month on the total amount of borrowed funds outstanding at the end of the previous month. Prepare a monthly cash budget for January, February, and March using the given details.

Cash Inflows:

Cash outflows:

Cash Budget:

January 60,000 February 55,000 March 65,000 April 70,000

Explanation / Answer

Answer:-

Cash Inflows:-

=(55000*10%)

=5500

7000

=(55000*60%)

=33000

=(55000*25%)

=13750

Cash outflows:-

=(80000*58%)

=46400

Month November December January February March April Sales 55000 80000 60000 55000 65000 70000 Cash sales(10%)

=(55000*10%)

=5500

8000 6000 5500 6500

7000

1 month later(60%)

=(55000*60%)

=33000

48000 36000 33000 39000 2 month later (25%)

=(55000*25%)

=13750

20000 15000 13750 Income sale of old car 2000 Total Cash Receipts 5500 41000 67750 63500 54500 59750

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