Question

Box Medical Supply has applied for a loan. City's First Bank has requested a budgeted balance sheet as of April​ 30, and a combined cash budget for April. As Box Medical​ Supply's controller, you have assembled the following​ information:

a.	March 31 equipment​ balance $52,200​;accumulated​ depreciation, $41,400.
b.	April capital expenditures of $42,300 budgeted for cash purchase of equipment.
c.	April depreciation​ expense, $800.
d.	Cost of goods​ sold, 60​% of sales.
e.	Other April operating​ expenses, including income​ tax, total $13,800​, 30​%of which will be paid in cash and the remainder accrued at April 30.
f.	March 31​ owners' equity,$92,500.
g.	March 31 cash​ balance $40,200.
h.	April budgeted​ sales $89,000​, 70% of which is for cash. Of the remaining 30​%, half will be collected in April and half in May.
i.	April cash collections on March​ sales, $29,200.
j.	April cash payments of March 31 liabilities incurred for March purchases of​ inventory, $17,300.
k.	March 31 inventory​ balance $29,600.
l.	April purchases of​ inventory, $10,700 for cash and $36,200 on credit. Half of the credit purchases will be paid in April and half in May.

1.	Prepare the budgeted balance sheet for Box Medical Supply at April 30. Show separate computations for​ cash, inventory, and​ owners' equity balances.
2.	Prepare the combined cash budget for April.
3.	Suppose Box Medical Supply has become aware of more efficient​ (and more​ expensive) equipment than it budgeted for purchase in April. What is the total amount of cash available for equipment purchases in​ April, before​ financing, if the minimum desired ending cash balance is $18,000​? ​(For this​ requirement, disregard the $42,300 initially budgeted for equipment​purchases.)
4.	Before granting a loan to Box Medical​ Supply, City's First Bank asks for a sensitivity analysis assuming that April sales are only $59,333 rather than the $89,000 originally budgeted.​ (While the cost of goods sold will​ change, assume that​ purchases, depreciation, and the other operating expenses will remain the same as in the earlier​ requirements.)
	a. Prepare a revised budgeted balance sheet for Box Medical​ Supply, showing separate computations for​ cash, inventory, and​ owners' equity balances. b. Suppose Box Medical Supply has a minimum desired cash balance of $17,000. Will the company need to borrow cash in​ April?

Answer 1

1) budgeted balance sheet for Box Medical Supply at April 30 showing separate computations for​ cash, inventory, and​ owners' equity balances.

2) Cash Budget for April:

3) As per budgedeted balance sheet, after making payment of $42,300 for purchase of equipment, Box Medical has an expected closing balance of Cash of $52,510. If we disregard the purchase of this equipment, cash availability increases to $52,510+$42,300 = $94,810. If minimum desired ending cash balance is $18,000, then $94,810-$18,000 = $76,810 is expected to be available before financing for more efficient equipment purchase.

Alternatively, simple calculation would be: $52,510+$42,300-$18,000 = $76,810.

4a) Revised budgeted balance sheet:

4b) As per revised budgeted balance sheet, Box Medical has an expected closing balance of Cash of $27,293. if the minimum desired cash balance is $17,000, still Box Medical Supply will have a spare cash of $27,293-$17,000 = $ 10,293. Therefore, the company will not be required to borrow cash in April.