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Carla Vista Company expects to have a cash balance of $115,000 on January 1, 2022. These are the relevant monthly budget data for the first two months of 2022. 1. Collections from customers: January $177,500, February $365,000. 2. Payments to suppliers: January $100,000, February $187,500. 3. Wages: January $75,000, February $100,000. Wages are paid in the month they are incurred. 4. Administrative expenses: January $52,500, February $60,000. These costs include depreciation of $2,500 per month. All other costs are paid as incurred. 5. Selling expenses: January $37,500, February $50,000. These costs are exclusive of depreciation. They are paid as incurred. 6. Sales of short-term investments in January are expected to realize $30,000 in cash. Carla Vista Company has a line of credit at a local bank that enables it to borrow up to $62,500. The company wants to maintain a minimum monthly cash balance of $50,000.

Answer 1

Solution

CARLA VISTA COMPANY
Cash Budget
For the Two months ended February 28, 2022
	January	February
Beginning Cash Balance	$     115,000.00	$ 127,500.00
Add: Cash receipts
Collection from customers	$     177,500.00	$ 365,000.00
Cash from sale of investment	$        30,000.00
Total cash receipts	$     207,500.00	$ 365,000.00
Cash Avalaible	$     322,500.00	$ 492,500.00
Less: Cash Payments
Payment to supplier	$     100,000.00	$ 187,500.00
Payment for wages	$          7,500.00	$ 100,000.00
Payment for administrative expenses	$        50,000.00	$    57,500.00
Payment for Selling expenses	$        37,500.00	$    50,000.00
Total Cash Payments	$     195,000.00	$ 395,000.00
Ending Cash Balance Before Financing	$     127,500.00	$    97,500.00
Financing
Borrowing
Repayments
Ending Cash Balance	$     127,500.00	$    97,500.00