Panther City has two major sources of revenues, property tax and sales tax, which are billed...

Panther City has two major sources of revenues, property tax and sales tax, which are billed according to the schedule at the top of the next page. Traditionally, property tax revenue have been received in cash according to the following schedule:

30 percent one month following the billing date 20 percent in second month
20 percent in third month
9 percent in fourth month
8 percent in fifth month
6 percent in sixth month
7 percent are not collected

The state collects the sales tax revenues and will transfer cash to the city on March 1, 2018, for the sales tax revenues earned in the last quarter of 2017.

Panther City is not planning any capital asset purchases during the next three months. Monthly cash disbursements for general operations are $3,500,000. Beginning cash balance for January 1, 2018, is $600,000. Panther City will borrow to ensure that the ending cash balance each month is at least $200,000.

Use this information to prepare a monthly cash budget for Panther City for January, February, and March of 2018.

2017	July	Aug.	Sept.	Oct.	Nov.	Dec.
Prop. Tax			50,000,000
Sales Tax	50,000	55,000	62,000	60,000	68,000	112,000

Expert Solution

First, we calculate the property and sales tax receipts in Jan, Feb, March :

Property tax of $50 million is billed in September and received in cash as per this schedule :

September	$0
October	$15,000,000
November	$10,000,000
December	$10,000,000
January	$4,500,000
February	$4,000,000
March	$3,000,000

Sales tax collected in last quarter of 2017 = $60,000 + $68,000 + $112,000 ==> $240,000. This is transferred to the city on 1st March, 2018

Now, we prepare the cash budget as below :

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