Use this information to prepare a cash budget for the months of February and March
The Cambridge Company has budgeted sales revenues as follows.
Jan Feb Mar
Credit sales $45000 $36000 $27000
Cash sales 27000 76500 58500
Total sales $72000 $112500 $85500
Past experience indicates that 60% of the credit sales will be collected in the month of sale and the remaining 40% will be collected in the
Purchases of inventory are all on credit and 40% is paid in the month of purchase and 60% in the month following purchase. Budgeted inventory
purchases are $97500 in January $67500 in February and $31500 in March.
Other budgeted cash receipts: (a) sale of plant assets for $18525 in February and (b) sale of new common stock for $25275 in March. Other
budgeted cash disbursements: (a) operating expenses of $10125 each month (b) selling and administrative expenses of $18750 each month (c) dividends of
$28500 will be paid in February and (d) purchase of equipment for $9000 cash in March.
The company has a cash balance of $15000 at the beginning of February and wishes to maintain a minimum cash balance of $15000 at the end of
each month. An open line of credit is available at the bank and carries an annual interest rate of 12%. Assume that all borrowing is done on the first day of
the month in which financing is needed and that all repayments are made on the last day of the month in which excess cash is available. Also assume that there
is no outstanding financing as of February 1.