Kim Incorporated is preparing its master budget for 2004. Shown at the top of the next page are expected cash inflows and outflows resulting from the sales, purchases, and administrative budgets. In addition to these cash flows, assume the company expects to pay \(\$ 10,000\) in income taxes each quarter. Also, assume Kim expects to pay a \(\$ 20,000\) dividend in the fourth quarter. The beginning cash balance is \(\$ 160,000\).

\section*{Required}
A. Create a cash budget for 2004 .
B. Assume that Kim has \(\$ 1,000,000\) of debt outstanding as of January 1, 2004. Given the cash budget should Kim borrow additional funds or repay any of the debt during 2004? Why or why not?
C. Why is it important to create a cash budget?

Transcribed Image Text:

Cash Collections from Sales Budget Total cash collections Cash Disbursements from Direct Quarter 2 3 Year $120,000 $140.000 $230.000 $250.000 $740,000 Materials Budget Total cash disbursements $ 60.000 $ 70,000 $115,000 $125.000 $350.000 Direct Labor Disbursements Total direct labor disbursements $ 16.000 $ 24.000 $ 40,000 $ 40,000 $120.000 Manufacturing Overhead Cash disbursements for Disbursements manufacturing overhead $ 31,000 $ 39,000 $ 55,000 $ 55,000 $180,000 Selling and Administrative Disbursements Cash expenditures for selling and administrative expenses $ 29,000 $ 31,000 $ 35.000 $ 35,000 $130,000