Question

Sandhill Company expects to have a cash balance of $69,000 on January 1, 2020. These are the relevant monthly budget data for the first two months of 2020.

1.		Collections from customers: January $106,500, February $219,000.
2.		Payments to suppliers: January $60,000, February $112,500.
3.		Wages: January $45,000, February $60,000. Wages are paid in the month they are incurred.
4.		Administrative expenses: January $31,500, February $36,000. These costs include depreciation of $1,500 per month. All other costs are paid as incurred.
5.		Selling expenses: January $22,500, February $30,000. These costs are exclusive of depreciation. They are paid as incurred.
6.		Sales of short-term investments in January are expected to realize $18,000 in cash. Sandhill Company has a line of credit at a local bank that enables it to borrow up to $37,500. The.company wants to maintain a minimum monthly cash balance of $30,000.

Prepare a cash budget for January and February. Show all your work for partial credits in your uploaded file. List items that increase cash balance first.

Answer 1

Cash Budget
For January and February
	January	February
Beginning cash balance	69,000	36,000
Add:Budgeted cash receipts:
Collection from customer	106,500	219,000
Sale of short term investment	18,000	0
Total available cash (A)	193,500	255,000
Less: Budgeted Cash payments:
Payment to suppliers	60,000	112,500
Payment for wages	45,000	60,000
Payment for administrative expenses	30,000	34,500
Payment for selling expenses	22,500	30,000
Total cash payments (B)	157,500	237,000
Preliminary cash balance (A-B)	36,000	18,000
Add: Borrowings	0	12,000
Ending cash balance	$36,000	$30,000

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