BossaNova Corporation prepares monthly cash budgets. Here are relevant data from operating budgets for 2007.

January February Sales $350,000 $400,000 Purchases 110,000 130,000 Salaries 84,000 95,000 Administrative expenses 70,000 75,000 Selling expenses 79,000 88,000 Problems: Set A 357

(a) Cash bal. $8,375.90 Prepare a cash budget.

(a) Apr. customer collections $59,000

(c) Apr.

borrowings $ 4,700 Prepare a cash budget.

(SO 7)

Gime 358 CHAPTER 7

(a) Jan. customer collections $326,000

(b) Jan. 31 cash bal. $ 56,000 Prepare a comprehensive bank reconciliation with theft and internal control deficiencies.

{SOuly2;.3) 4)

(a) Cash bal. $21,067.72 Internal Control and Cash All sales are on account. Collections are expected to be 60% in the month of sale, 30%

in the first month following the sale, and 10% in the second month following the sale.

Fifty percent (50%) of purchases are paid in cash in the month of purchase, and the balance due is paid in the month following the purchase. All other expenses are paid in the month incurred except for administrative expenses, which include $1,000 of depreciation per month.

Other data. 1. Credit sales — November 2006, $260,000; December 2006, $300,000 2. Purchases — December 2006, $100,000 3. Other receipts — January: collection of December 31, 2006, notes receivable $15,000;

February: proceeds from sale of securities $6,000 4. Other disbursements—February: $12,000 cash dividend The company’s cash balance on January 1, 2007, is expected to be $52,000. The company wants to maintain a minimum cash balance of $50,000.

Instructions

(a) Prepare schedules for (1) expected collections from customers and (2) expected payments for purchases for January and February.

(b) Prepare a cash budget for January and February.