Zurich Inc. prepares monthly cash budgets. Here are relevant data from oper-

(SO 7) ating budgets for 2007.

cas January epee Sales $340,000 $400,000 Purchases 100,000 130,000 Salaries 80,000 95,000 Selling and administrative expenses 135,000 160,000 All sales are on account. Collections are expected to be 50% in the month of sale, 30%

in the first month following the sale, and 20% in the second month following the sale.

Forty percent (40%) 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 items above are paid in the month incurred. Depreciation has been excluded from selling and administrative expenses.

Other data. 1. Credit sales — November 2006, $240,000; December 2006, $280,000 2. Purchases — December 2006, $90,000 3. Other receipts — January: collection of December 31, 2006, interest receivable $2,000;

February: proceeds from sale of short-term investments $8,000 4. Other disbursements—February: payment of $20,000 for land The company’s cash balance on January 1, 2007, is expected to be $60,000. The company wants to maintain a minimum cash balance of $50,000.

Instructions

(alan -eistomer

(a) Prepare schedules for (1) expected collections from customers and (2) expected paycollections

$302,000 ments for purchases for January and February.

(b) Jan. 31 cash bal. $ 55,000

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

Prepare a comprehensive bank