Dorothy K leased space . Runs out of cash. Late payments on orders, problems wit
ID: 2760473 • Letter: D
Question
Dorothy K leased space . Runs out of cash. Late payments on orders, problems with suppliers. Planning to borrow $. Cash budget : Sales are made bassed on cash only. urhases must be aid durring following month. Salary $4,800 per month, reent $2,000 per month. Tax payment $12,000 in Decemer. Current cash (December 1) $400, but agreed to manti an average bank balance of $6,000 - target cash balance. Purchases during Noveember $140,000
December Sales $160,000 Purchases $40,000
January Sales $40,000 Purchases $40,000
February Sales $60,000 Purchases $40,000
1. Prepare cash budget for Dec Jan Feb
2. Suppose that starts selling on credit basis on Dec1st, giving customers 30 days to pay. What would the company's loan requirements be at the end of Decmbeer in this case. Include calculations in answer
Explanation / Answer
Table Showing cash budget for Dec Jan Feb
Particulars
December
January
February
Opening balance
400
1,01,600
94,800
Sales
160000
40,000
60,000
(-) Purchase
40,000
40,000
40,000
(-) Salary
4,800
4,800
4,800
(-) Rent
2,000
2,000
2,000
(-) Tax payment
12,000
Cash balance before maintaining balance
1,01,600
94,800
1,08,000
Table showing loan requirements be at the end of December:
Particulars
December
Opening balance
400
Sales
0
(-) Purchase
40,000
(-) Salary
4,800
(-) Rent
2,000
(-) Tax payment
12,000
Cash balance before maintaining balance
-58,400
Maintaining balance
6,000
loan requirements
-52,400
Particulars
December
January
February
Opening balance
400
1,01,600
94,800
Sales
160000
40,000
60,000
(-) Purchase
40,000
40,000
40,000
(-) Salary
4,800
4,800
4,800
(-) Rent
2,000
2,000
2,000
(-) Tax payment
12,000
Cash balance before maintaining balance
1,01,600
94,800
1,08,000
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