Question

4. AJ Co. is projecting a cash balance of $30,000 in its beginning balance for the year. AJ’s schedule of expected collections from customers for the first quarter of 2014 shows total collections of $180,000. The schedule of expected payments for direct materials for the first quarter of 2014 shows total payments of $41,000. Other information gathered for the first quarter of 2014 is sale of equipment $3,000; direct labor $70,000, manufacturing overhead $35,000, selling and administrative expenses $45,000; and purchase of securities $14,000. AJ wants to maintain a balance of at least $25,000 cash at the end of each quarter. Prepare a cash budget for the first quarter.

AJ Co, Cash Budget For the Quarter Ended March 31, 2014
Beginning cash balance	30,000
Add: Receipts
Total Collections from customers	180,000
Sales of equipment	3000
Total receipts	183,000
Total available cash
Less: Disbursements
Direct materials	41,000
Direct labor	70,000
MOH	35,000
Selling and administrative expenses	45,000
Purchase of securities	14,000
Total disbursements	205,000
Excess of available cash over disbursements
Financing
Add: Borrowings
Less: Repayments
Ending cash balance

Answer 1

• All working forms part of the answer

AJ Co,
Cash Budget
For the Quarter Ended March 31, 2014
Beginning cash balance	$                      30,000.00
Add: Receipts
Total Collections from customers	$                  1,80,000.00
Sales of equipment	$                        3,000.00
Total receipts	$                  1,83,000.00
Total available cash	$                  2,13,000.00
Less: Disbursements
Direct materials	$                      41,000.00
Direct labor	$                      70,000.00
MOH	$                      35,000.00
Selling and administrative expenses	$                      45,000.00
Purchase of securities	$                      14,000.00
Total disbursements	$                  2,05,000.00
Excess of available cash over disbursements [$213,000 – $205,000]	$                        8,000.00
Financing
Add: Borrowings [$25,000 – $8,000]	$                      17,000.00
Less: Repayments
Ending cash balance	$                      25,000.00