Question

OJ Small Company needs a cash budget for the month of April 2020. The company's controller has provided you with the following information and assumptions:

A. The April 1, 2020 cash balance is expected to be $14,000.

B. All sales are on account. Credit sales are collected over a 3 month period -- 50 percent in the month of sale, 35 percent in the month following sale, and 15 percent in the second month following sale. Actual sales for Feb. and March were $100,000 and $90,000, respectively. April's sales are budgeted at $110,000

C. Investments in marketable securties are expected to be sold for $25,000 during the month of April.

D. The controller estimates that cash will be paid for direct materials totaling $35,400 during the month of April.

E. During April, direct labor costs are estimated to be $19,000

F. Manufacturing overhead is estimated to be $7,600. Further, the controller estimates aprox. 10 percent of the manufacturing overhead is depreciation on the factory building and equipment.

G. Selling and administrative expenses are budgeted at $22,000 for April. Of this amount, $7,000 is for deprecation

H. During April, OJ Small Company plans to buy a new delivery van costing $25,000. The company will pay cash for the van.

I. OJ Small Company owes $35,000 in income tax, which must be paid in April.

J. OJ Small Company must maintain a minimum cash balance of $10,000. To bolster the cash position as needed, an open line of credit is available from the bank. There is no current balance on the credit line. The amount of the credit line is limited to$100,000. (Ignore an interest to be paid on open balances.)

Instructions Prepare the following:

1. Create a schedule showing the calculations of cash collections for April( Show work)

2. Create a cash budget for the month of April. Indicate in the financing section any borrowing that will be necessary during the month.

Answer 1