Pink Martini Corporation is projecting a cash balance of $31,000 in its December
ID: 2442127 • Letter: P
Question
Pink Martini Corporation is projecting a cash balance of $31,000 in its December 31, 2007, balance sheet. Pink Martini's schedule of expected collections from customers for the first quarter of 2008 shows total collections of $180,000. The schedule of expected payments for direct materials for the first quarter of 2008 shows total payments of $41,000. Other information gathered for the first quarter of 2008 is: sale of equipment $3,5000; direct labor $70,000, manufacturing overhead $35,000, selling and administrative expenses $45,000; and purchase of securities $12,000. Pink Martini wants to maintain a balance of at least $25,000 cash at the end of each quarter.
Instructions:
Prepare a cash budget for the first quarter.
Explanation / Answer
Cash Budget for the Quarter ended 31st March Opening Balance 31,000.00 Expected Cash Collections 180,000.00 Expected receipt from sale of Equipment 3,500.00 Less: Scheduled Payments: Direct Material (41,000.00) Direct Labor (70,000.00) MOH (35,000.00) Selling and Administrative (45,000.00) Expenses Purchase of securities (12,000.00) Balance at the end 11,500.00 Amount to be borrowed 13,500.00 to maintain the minimum Balance at the end Balance at the end of the quarter 25,000.00