Mayfield Company expects to have a cash balance of $46,000 on January 1, 2010. T
ID: 2388368 • Letter: M
Question
Mayfield Company expects to have a cash balance of $46,000 on January 1, 2010. These are the relevant monthly budget data for the first two months of 2010.1. Collections from customers: January $88,307, February $164,307.
2. Payments to suppliers: January $58,307, February $93,307.
3. Wages: January $30,000, February $40,000. Wages are paid in the month they are incurred.
4. Administrative expenses: January $21,000, February $28,000. These costs include depreciation of $1,000 per month. All other costs are paid as incurred.
5. Selling expenses: January $15,417, February $20,417. These costs are exclusive of depreciation. They are paid as incurred.
6. Sales of short-term investments in January are expected to realize $12,000 in cash. Mayfield has a line of credit at a local bank that enables it to borrow up to $25,000. The company wants to maintain a minimum monthly cash balance of $20,000.
Complete the cash budget for January and February below. (List multiple items under receipts, disbursements and financing from largest to smallest amounts, e.g. 10, 5, 2.)
MAYFIELD COMPANY
Cash Budget
For the Two Months Ending February 28, 2010
January February
Beginning cash balance $
$
Add: Receipts
RepaymentsCollections from customersWagesBorrowingsSelling expensesPayments to suppliersSale of short-term investmentsAdministrative expenses
WagesBorrowingsRepaymentsPayments to suppliersSale of short-term investmentsCollections from customersAdministrative expensesSelling expenses
Total receipts
Total available cash
Less: Disbursements
WagesAdministrative expensesSale of short-term investmentsRepaymentsPayments to suppliersSelling expensesCollections from customersBorrowings
WagesRepaymentsAdministrative expensesBorrowingsSelling expensesCollections from customersSale of short-term investmentsPayments to suppliers
Sale of short-term investmentsRepaymentsPayments to suppliersAdministrative expensesCollections from customersSelling expensesWagesBorrowings
BorrowingsWagesAdministrative expensesPayments to suppliersCollections from customersSale of short-term investmentsRepaymentsSelling expenses
Total disbursements
Excess (deficiency) of available cash over disbursements
Financing
RepaymentsWagesSelling expensesPayments to suppliersCollections from customersBorrowingsSale of short-term investmentsAdministrative expenses
BorrowingsSale of short-term investmentsCollections from customersSelling expensesPayments to suppliersRepaymentsWagesAdministrative expenses
Ending cash balance $
$
Explanation / Answer
. . . . . . . . . . . . . . . . . . . . .January. . . . . . . . . . . . . . .February Beginning Balance . . . . . . . $46,000 . . . . . . . . . . . . . $..22,583 Cash Receipts Customer Collections. . . . . ...$88,307 . . . . . . . . . . . . . . $164,307 Investment Sales. . . . . . . . . .$12,000 Total Receipts . . . . . . . . . . . $100,307 . . . . . . . . . . . . . . .$164,307 Cash Disbursements Payments to Suppliers . . . . . $58,307 . . . . . . . . . . . . . . . $93,307 Wages . . . . . . . . . . . . . . . . .$30,000. . .. . . . . . . . . . . . .$40,000 Administrative Wages . . . . . . $20,000 . . . . . . . . . . . . . . . $27,000 Selling Expenses . . . . . . . . . $15,417 . . . . . . . . . . . . . . . $20,417 Total Disbursements. . . . . . .$123,724 . . . . . . . . . . . . . . $180,724 Ending Balance . . . . . . . . . .$22,583 . . . . . . . . . . . . . .$6,166 but as company wants to maintain minimum balance of $20,000 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,834 Ending Balance . . . . . . . . . .$22,583 . . . . . . . . . . . . . .$.20,000