Question

The treasurer of Calico Dreams Company has accumulated the following budget information for the first two months of the coming fiscal year:

	March		April
Sales	$450,000		$520,000
Manufacturing costs	290,000		350,000
Selling and administrative expenses	41,400		46,400
Capital additions	250,000		-

The company expects to sell about 35% of its merchandise for cash. Of sales on account, 80% are collected in full in the month of the sale, and the remainder in the month following the sale. One-fourth of the manufacturing costs are paid in the month in which they are incurred, and the other three-fourths in the following month. Depreciation, insurance, and property taxes represent $6,400 of the monthly selling and administrative expenses. Insurance is paid in February, and property taxes are paid yearly in September. A $40,000 installment on income taxes is to be paid in April. Of the remainder of the selling and administrative expenses, one-half are to be paid in the month in which they are incurred and the balance in the following month. Capital additions of $250,000 are paid in March.

Current assets as of March 1 are composed of cash of $45,000 and accounts receivable of $51,000. Current liabilities as of March 1 are accounts payable of $121,500 ($102,000 for materials purchases and $19,500 for selling and administrative expenses). Management desires to maintain a minimum cash balance of $25,000.

Prepare a monthly cash budget for March and April. If an amount box does not require an entry, leave it blank. Use the minus sign to indicate negative numbers or decrease in cash.

Calico Dreams Company
Cash Budget
For the Two Months Ending April 30
	March	April
Estimated cash receipts from:
Cash sales	$	$
Collections of accounts receivable
Total cash receipts	$	$
Estimated cash payments for:
Manufacturing costs	$	$
Selling and administrative expenses
Capital additions
Income taxes
Total cash payments	$	$
Cash increase (decrease)	$	$
Cash balance at beginning of month
Cash balance at end of month	$	$
Minimum cash balance
Excess (deficiency)	$	$

Answer 1

   (A) ($19,000) + $45,000 = $26,000

(A)* closing balance of cash in march is the opening balance of cash in april