Cosmo Corporation is projecting a cash balance of $32,785 in its December 31, 20
ID: 2382030 • Letter: C
Question
Cosmo Corporation is projecting a cash balance of $32,785 in its December 31, 2013, balance sheet. Cosmo schedule of expected collections from customers for the third quarter of 2013 shows total collections of $190,875. The schedule of expected payments for direct materials for the third quarter of 2013 shows total payments of $41,300. Other information gathered for the first quarter of 2013 is: sale of equipment $3,471, direct labor $69,178, manufacturing overhead $37,543, and purchase of securities $15,000, plus a $300 brokerage fee. Selling and administrative expenses are projected to be $45,116; this figure includes $1,116 in depreciation expense on the office equipment. All costs and expenses will be paid in cash. Cosmo wants to maintain a balance of at least $25,000 cash at the end of each quarter.
Instructions:
Complete the cash budget for the first quarter.
Explanation / Answer
Cash Budget
For the Quarter Ended March 31, 2012
Beginning cash balance.......... ...... ...... ....... ......$31,000
Add: Receipts
Collections from customers..... ....... ...... .....180,000
Sale of equipment........ ....... ....... ....... ........ .....3,500
Total receipts.......... ...... ....... ...... ....... ..... .....183,500
Total available cash...... .... ......... ........ ..........214,500
Less: Disbursements
Direct materials....... ......... ....... ....... ......... .... ...41,000
Direct labor....... ........ ........ ...... ......... ...... ....... .70,000
Manufacturing overhead........ ...... ....... ...... .......35,000
Selling and administrative expense ....... ..... ......45,000
Purchase of securities........ ....... ....... ...... ..... .....12,000
Total disbursements ...... ........ ...... ....... ....... ....203,000
Excess of available cash over disbursements....11,500 (214,500 - 203,000)
Financing
Borrowings ......... ....... ........ ....... .......... ... ...... .....13,500
Repayments......... ......... ........ ......... .......... ........ ......0
Ending cash balance....... ........ ....... ........ ..... ....$25,000