Question

Blossom Company expects to have a cash balance of $23,000 on January 1, 2022. These are the relevant monthly budget data for the first two months of 2022.

1.		Collections from customers: January $35,500, February $73,000.
2.		Payments to suppliers: January $20,000, February $37,500.
3.		Wages: January $15,000, February $20,000. Wages are paid in the month they are incurred.
4.		Administrative expenses: January $10,500, February $12,000. These costs include depreciation of $500 per month. All other costs are paid as incurred.
5.		Selling expenses: January $7,500, February $10,000. These costs are exclusive of depreciation. They are paid as incurred.
6.		Sales of short-term investments in January are expected to realize $6,000 in cash. Blossom Company has a line of credit at a local bank that enables it to borrow up to $12,500. The company wants to maintain a minimum monthly cash balance of $10,000.

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

Answer 1

Cash Budget		Amount $
	January	February
Beginning Cash Balance	23,000	12,000
Add: Collections from Cutomers	35,500	73,000
Sale of short term investments	6,000	-
Total Cash Available	64,500	85,000
Less: Cash disbursements
Purchase to Suppliers	20,000	37,500
Wages	15,000	20,000
Administrative expenses	10,000	11,500
Selling Expenses	7,500	10,000
Total Cash disbursements	52,500	79,000
Excess( deficiency) of cash available	12,000	6,000
over disbursements
Financing:
Borrowings		4,000
Repayments
Total Financing	-	4,000
Ending Cash Balance	12,000	10,000