Question

Mass Company has $ 12500 in cash on hand on January 1 and has collected the following budget​ data: Assume Mass has cash payments for selling and administrative expenses including salaries of $ 60000 plus commissions of 3​% of​ sales, all paid in the month of sale. The company requires a minimum cash balance of $ 10 000. Prepare a cash budget for January and February. Will Mass need to borrow cash by the end of February​?

	January	Febuary
Sales	$1,330,000	$720,000
Cash Receipts from customers	851,740	872,000
Cash payments for merchandise inventory	561,200	532,310

Mass Company Cash Budget Two Months Ended January 31 and Febuary 28
	January
Begginning cash balance
Cash receipts
Cash available
cash payments:
Purchases of merchandise inventory
Selling and administrative inventory
Total Cash Payments
Ending cash balance before financing
Minimum cash balance desired
projected cash excess (deficiency)
Financing:
Borrowing
Principal repayments
total effects of financing
ending cash balance

Answer 1

Account	January	February
Beginning balance	$          12,500	$        203,140
Cash receipts	$        851,740	$        872,000
Cash available	$        864,240	$     1,075,140
Cash payments:
Purchases of inventory	$        561,200	$        532,310
Selling inventory	$          99,900	$          81,600
Total cash payments	$        661,100	$        613,910
Ending cash balance before financing	$        203,140	$        461,230
Minimum cash desired	$          10,000	$          10,000
Projected cash excess	$        193,140	$        451,230
Financing:	$                   -	$                   -
Borrowing:	$                   -	$                   -
Total effects of financing	$                   -	$                   -
Ending cash balance	$        203,140	$        461,230

January selling inventory payment = 1330000*3%+60000 = 99,900

Feb payment =720000*3%+60000 = 81,600

Mass need not borrow cash in any month.

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