Enright Company expects to have a cash balance of $46,000 on January 1, 2014. Th

Question

Enright Company expects to have a cash balance of $46,000 on January 1, 2014. These are the relevant monthly budget data for the first two months of 2014.

Prepare a cash budget for January and February.

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1. Collections from customers: January $71,000, February $146,000. 2. Payments to suppliers: January $40,000, February $75,000. 3. Wages: January $30,000, February $40,000. Wages are paid in the month they are incurred. 4. Administrative expenses: January $21,000, February $24,000. These costs include depreciation of $1,000 per month. All other costs are paid as incurred. 5. Selling expenses: January $15,000, February $20,000. 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. Enright 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. ENRIGHT COMPANY Cash Budget For the Two Months Ending February 28, 2014 January February Add: Less Add: Less

Explanation / Answer

January February Opening Balance $46,000 $22,000 Add: Collection from customers $71,000 $146,000 Sale of short-term investments $12,000 Total Inflow $83,000 $146,000 Less Payment to suppliers $40,000 $75,000 Wages $30,000 $40,000 Administrative Expenses $22,000 $25,000 (Dep is added since there is no cash outflow) Selling Expenses $15,000 $20,000 Total Outflow $107,000 $160,000 Net Cash $22,000 $8,000 Add : Borrowings 12000 Closing Balance $22,000 $20,000

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