Question

Carla Vista Company expects to have a cash balance of $64,400 on January 1, 2022. These are the relevant monthly budget data for the first two months of 2022.

1.		Collections from customers: January $99,400, February $204,400.
2.		Payments to suppliers: January $56,000, February $105,000.
3.		Wages: January $42,000, February $56,000. Wages are paid in the month they are incurred.
4.		Administrative expenses: January $29,400, February $33,600. These costs include depreciation of $1,400 per month. All other costs are paid as incurred.
5.		Selling expenses: January $21,000, February $28,000. These costs are exclusive of depreciation. They are paid as incurred.
6.		Sales of short-term investments in January are expected to realize $16,800 in cash. Carla Vista Company has a line of credit at a local bank that enables it to borrow up to $35,000. The company wants to maintain a minimum monthly cash balance of $28,000.

Prepare a cash budget for January and February. (List items that increase cash balance first.)

Answer 1

Solution

CARLA VISTA COMPANY
Cash Budget
For the Two months ended February 28, 2022
	January	February
Beginning Cash Balance	$        64,400.00	$    33,600.00
Add: Cash receipts
Collection from customers	$        99,400.00	$ 204,400.00
Cash from sale of investment	$        16,800.00
Total cash receipts	$     116,200.00	$ 204,400.00
Cash Avalaible	$     180,600.00	$ 238,000.00
Less: Cash Payments
Payment to supplier	$        56,000.00	$ 105,000.00
Payment for wages	$        42,000.00	$    56,000.00
Payment for manufacturing expenses	$        28,000.00	$    32,200.00
Payment for Selling and administrative expenses	$        21,000.00	$    28,000.00
Total Cash Payments	$     147,000.00	$ 221,200.00
Ending Cash Balance Before Financing	$        33,600.00	$    16,800.00
Financing
Borrowing		$    11,200.00
Repayments
Ending Cash Balance	$        33,600.00	$    28,000.00