Question

4. Cash Budget (20 points) The following information pertains to Monroe Company: Month December January February March Sales Purchases $130,000 $65,000 $68,000 $35,000 $87,000 $46,000 $106,000 $48,000 Cash is collected from customers in the following manner: Month of sale 30% Month following the sale 65% Written off as uncollectible 5% .45% of purchases are paid for in cash in the month of purchase, and the balance is paid the following month. Labor costs are 20% of sales. Other operating costs are S42,000 per month (including S8,000 of depreciation). Both of these are paid in the month incurred. The cash balance on January 1 is $6,900. A minimum cash balance of $6,000 is required at the end of the month. Money can be borrowed in multiples of $1.000 at the beginning of the month. Interest on any borrowings is paid when principle is repaid. Repayments in S1,000 increments and interest payments are made at the end of the month with interest charged at a rate of 1% a month. Prepare a cash budget for January, February and March and for the first quarter

Answer 1

Monroe Company Cash Budget For the First Quarter
	January	February	March	Quarter
Beginning Cash Balance	$ 6,900	$ 12,700	$ 6,650	$ 6,900
Add: Cash Collections	104,900	70,300	88,350	$ 263,550
Total Cash Available	111,800	83,000	$ 95,000	270,450
Less: Cash Payments for
Merchandise Purchases	$ 51,500	$ 39,950	$ 46,900	$ 138,350
Labor	13,600	17,400	21,200	52,200
Other Operating Costs	34,000	34,000	34,000	102,000
Total Cash Payments	99,100	91,350	102,100	292,550
Cash Surplus ( Deficit )	12,700	(8,350)	(7,100)	(22,100)
Financing
Borrowings	0	15,000	14,000	29,000
Repayment	0	0	0	0
Interest	0	0	0	0
Total Financing	0	15,000	29,000
Ending Cash Balance	12,700	6,650	6,900	6,900

Workings:

1.

Schedule of Cash Collections
	January	February	March	Quarter
December Sales	$ 84,500	0	0	$ 84,500
January Sales	20,400	44,200	0	64,600
February Sales	0	26,100	56,550	82,650
March Sales	0	0	31,800	31,800
Total Cash Collections	$ 104,900	$ 70,300	$ 88,350	$ 263,550

2.

Schedule of Cash Payments for Merchandise Purchases
	January	February	March	Quarter
December Purchases	$ 35,750	0	0	$ 35,750
January Purchases	15,750	19,250	0	35,000
February Purchases	0	20,700	25,300	46,000
March Purchases	0	0	21,600	21,600
Total Cash Payments	$ 51,500	$ 39,950	$ 46,900	$ 138,350