In: Accounting
The treasurer of Westmark Industrial, Inc., a wholesale distributor of household appliances, wants to estimate his company’s cash balances for the first three months of 2017. Using the information below, construct a monthly cash budget for Westmark for January through March 2017. Westmark’s sales are 25 percent for cash, with the rest on 30-day credit terms. Its purchases are all on 45-day credit terms. Does it appear from your results that the treasurer should be concerned about investing excess cash or looking for a bank loan?
Westmark Industrial selected information in $ thousands
2016 (Actual)
October: Sales 360, Purchases 510
November: Sales 420, Purchases 540
December: Sales 900, Purchases 850
2017 (Projected)
January: Sales 400, Purchases 150
February: Sales 300, Purchases 300
March: Sales 240, Purchases 120
Wages payable monthly 200
Principal payment on debt due in March 190
Interest due in March 75
Dividend payable in March 180
Cash balance on 1 January 2017 285
Minimum desired cash balance 175