Question

wickford Company's financial managers are meeting with the company's bank to renew their line of credit and discuss their investment needs. They have prepared the comp 's opera﹃ cash bud for the last six morths of the wr. The following budget assumptions were used to construct the budget: Wickford's total sales for each month were fiest calculated in the sales budget and are reflected on the first line of the cash budget. Widbrd's sales are made oneredt with tems of 2/10, nee 30.weMord's experience l·that 20% is colected from astomers who take advantage of the d count, 70%-colected in second month, and the last 10%is colected in the thid month after the sale. The budget a unes that there are bad . . The cost of mater als wverages 45% of Widhed's finished product. The purchases are penenty made one month in advance of the sale, and Wickford pays its suppliers in 30 days. Accordingly, if July sales are forecasted at $1,210 miftion, then purchases during June would be $545 (51,210 mition x0.45),nd tis rt would be paid in July. and salaries at 16% of sales, monthly rent of $44 erowi egensesindude w expenses at of sales. Estimated tax payments of SS.lon and S67 milion ae requred to be paid on Juty 15 and October 15, respectively. In addition, a $1,100 miltion payment for a new pliant must be made in September Awme that wickford's targeted cash balance is $300, and the estimated cash on hand on Mylis$306. . ad other · Use the preceding information to fill in the missing amounts in the following cash budget. Wickford Company Cash Budget For the Six Months Ended December 31, Year 1 (S millions) $1,045$1,078 $1,100 1,1111,133$1,155 $1,188$1,210 Credit purchases 510 545 August September October November December Cash recejpts Collections from this month's sales Collections from previous month's sales Collections from sales two months previously 218 770 778 793 113 116 Total cash receipts $1,096 $2,110 1,130 $1,155 1,185 510 Payments for credit purchases Wages and salaries 495 176 545 178 Other expenses 57 Payment for plant construction 1,100 に Total cash disbursements $1,892に $544 Receipts- disbursements) Beginning cash balance Ending cash balance Target (minimum) cash balance Surplus (shortfall) cash $242 -$782 $256 327 $341 5366 $340 $667 $1,008 $248 es $367 708 Use the information provided in the budget to complete the following sentences Wickford Company will be able to invest in short-term marketable securities in some months and will need to borrow to cover cash requirements in others. In the last six months of the year, Wickford wil to end the year with a cash of $ and a cash of $ Wickford Company wil want acredit ine of at least to cover the month with the greatest shortfail, and the financial managers can tell the bank to expect that they wds be able to invest up to in short-term marketable securities