1. Prepare a monthly cash budget for Jones Products Inc. for the last six months of 2020

Use the following assumptions to prepare your cash budget: Revenue estimates (in thousands):

May * $385

Jun* $410

Jul $495 Oct * Historical

Collection on sales (all sales on credit):

Current month: 18% First month following: 66% Second month following: 15%

Aug $550 Nov $680 Sep $575 Dec $420 $590 Jan (2021) $320

Purchases of raw materials:

61% of projected following month sales

Payment on purchases: 30 days following purchase of materials

Other expenses and disbursements (in thousands):

Utilities:

Wages and salaries:

Other fixed expenses: Interest on bonds (not LOC): Quarterly tax payments: Equipment maintenance:

$15/month

$35 + 2% current month's sales

$5/month

$38 in Nov ($0 all other months)

$40/month in Sep and Dec ($0 all other months) $175 in Aug ($0 all other months)

Line-of-credit:

$1,000,000 maximum available credit

No maintenance fee

3.50% interest (annual rate, compounded monthly) on ending balance of prior month

Other:

• -A minimum cash balance of $100K must be maintained at the end of each month
• -A balance of $55K on the line-of-credit exists at the end of June
• -Quarterly dividends of $25K will be paid in Jul and Oct ($0 all other months)
• -Any cash in excess of $100K at the end of each month will first be used to pay down any
• existing balance on the LOC, then swept into money market funds. Money market funds will earn 0.9% per annum (0.075% per month)