Cash Budget Assignment Prepare a cash budget for 2018 based on the following inf
ID: 2786225 • Letter: C
Question
Cash Budget Assignment
Prepare a cash budget for 2018 based on the following information:
Cash Receipts
25% of sales are in cash and collected in the month the sale is made and 75% are on credit and collected in the month after the sale. December 2017 sales were $3 million. The sales forecast for 2018 is as follows:
January
February
March
April
May
June
2,800,000
2,500,000
3,200,000
3,400,000
3,600,000
3,600,000
July
August
September
October
November
December
3,800,000
4,000,000
3,600,000
3,400,000
2,800,000
2,600,000
Cash Disbursements
The disbursements for this firm are as follows:
Payments for raw materials are calculated based on 50% of current month sales.
Operating expenses are $700,000 per month.
Corporate overhead is $100,000 per month.
$1.5 million semi-annual bond interest payments are due in May and November.
$1.8 million in new equipment will arrive in May and must be paid for in July.
$1.2 million in new equipment will arrive in September and must be paid for in October.
A $1.4 million insurance premium is due in February.
$900,000 quarterly real estate tax payments are due in February, May, August, and November
Cash/Credit Line Information
The company must have a minimum cash balance of $200,000 at month-end and the cash balance at the end of December 2017 is $750,000. The company maintains a $1 million credit line for short-term liquidity purposes, none of which is outstanding at the end of December 2017.
DO NOT include interest expense on the credit line in your calculations.
January
February
March
April
May
June
2,800,000
2,500,000
3,200,000
3,400,000
3,600,000
3,600,000
July
August
September
October
November
December
3,800,000
4,000,000
3,600,000
3,400,000
2,800,000
2,600,000
Explanation / Answer
Below is the cash budget table -:
The firm will take credit in february to maintain $200000 minimum balance
january February March April May June July August September October November December Cash balance $750,000 $1,500,000 $875000 $1150000 $1900000 $350000 $1350000 $500000 $650000 $1950000 $1800000 $450000 25% of sales $700000 $625000 $800000 $850000 $900000 $900000 $950000 $1000000 $900,000 $850000 $700000 $650000 75%of previous months sales $2250000 $2100000 $1875000 $2400000 $2550000 $2700000 $2700000 $2850000 $3000000 $2700000 $2550000 $2100000 raw material cost ($1400,000) ($1250000) ($1600000) ($1700000) ($1800000) ($1800000) ($1900000) ($2000000) ($1800000) ($1700000) ($1400000) ($1300000) Operating Expenses ($700,000) ($700,000) ($700,000) ($700,000) ($700,000) ($700,000) ($700,000) ($700,000) ($700,000) ($700,000) ($700,000) ($700,000) corporate overhead ($100,000) ($100,000) ($100,000) ($100,000) ($100,000) ($100,000) ($100,000) ($100,000) ($100,000) ($100,000) ($100,000) ($100,000) Semi-annual bond payment ($1,500,000) ($1,500,000) new equipment expense ($1,800,000) ($1200000) insurance premium ($1,400,000) real state tax ($900000) ($900000) ($900000) ($900000) credit line $1000000 cash balance at end of month $1,500,000 $875000 $1150000 $1,900,000 $350000 $1350000 $500000 $650000 $1950000 $1800000 $450000 $1100000