Exercise 7-14 Sunland Company expects to have a cash balance of $61,300 on Janua

Question

Exercise 7-14

Sunland Company expects to have a cash balance of $61,300 on January 1, 2017. These are the relevant monthly budget data for the first two months of 2017.

Prepare a cash budget for January and February.

January

February

Open Show Work

1. Collections from customers: January $86,300, February $161,300. 2. Payments to suppliers: January $55,300, February $90,300. 3. Wages: January $30,740, February $40,740. Wages are paid in the month they are incurred. 4. Administrative expenses: January $21,740, February $24,740. These costs include depreciation of $1,000 per month. All other costs are paid as incurred. 5. Selling expenses: January $15,740, February $20,740. These costs are exclusive of depreciation. They are paid as incurred. 6. Sales of short-term investments in January are expected to realize $12,740 in cash. Sunland Company 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 $35,300.

Explanation / Answer

Cash budget Jan Feb Cash receipts Beginning cash balance 61,300 37,820 Add: Collection from customers 86,300 161,300 Sale of short term investment 12,740 0 Total receipts 160,340 199120 Cash Disbursement less payment to suppliers 55,300 90,300 Wages paid 30,740 40,740 Administrative expense 20,740 23,740 Selling expense 15,740 20,740 total disbursement 122,520 175,520 Excess(Deficiency) 37,820 23,600 financing: Borrowing 0 11,700 Repayment 0 0 total financing 0 0 cash balance,ending 37,820 35,300

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