Question

Sandhill Company expects to have a cash balance of $119,600 on January 1, 2022. These are the relevant monthly budget data for the first two months of 2022. 1. Collections from customers: January $184,600. February $379,600. 2. Payments to suppliers: January $104,000. February $195,000. 3. Wages: January $78,000. February $104,000. Wages are paid in the month they are incurred. 4. Administrative expenses: January $54,600. February $62,400. These costs include depreciation of $2,600 per month. All other costs are paid as incurred. 5. Selling expenses: January $39.000. February $52,000. These costs are exclusive of depreciation. They are paid as incurred. 6. Sales of short-term investments in January are expected to realize $31,200 in cash. Sandhill Company has a line of credit at a local bank that enables it to borrow up to $65.000. The company wants to maintain a minimum monthly cash balance of $52,000. Prepare a cash budget for January and February. (List items that increase cash balance first.) SANDHILL COMPANY Cash Budget January February

Answer 1

Solution

SANDHILL COMPANY
Cash Budget
For the Two months ended February 28, 2022
	January	February
Beginning Cash Balance	$     119,600.00	$    62,400.00
Add: Cash receipts
Collection from customers	$     184,600.00	$ 379,600.00
Cash from sale of investment	$        31,200.00
Total cash receipts	$     215,800.00	$ 379,600.00
Cash Avalaible	$     335,400.00	$ 442,000.00
Less: Cash Payments
Payment to supplier	$     104,000.00	$ 195,000.00
Payment for wages	$        78,000.00	$ 104,000.00
Payment for administrative expenses	$        52,000.00	$    59,800.00
Payment for Selling expenses	$        39,000.00	$    52,000.00
Total Cash Payments	$     273,000.00	$ 410,800.00
Ending Cash Balance Before Financing	$        62,400.00	$    31,200.00
Financing
Borrowing		$    20,800.00
Repayments
Ending Cash Balance	$        62,400.00	$    52,000.00