3. Budgeting for cash Which of the following statements are true with regard to a cash budget? Check all that apply. Cash budgets provide less specific financial information than the percentage-of-sales method and the statement of cash flows. A cash budget provides information about a company's ability to repay its loans or meet its other obligations. The single biggest disadvantage of the cash budget is that it is not useful in identifying a firm's potential cash shortages. An advantage of the cash budget over other financial forecasting tools is its ability to reflect the precise timing and magnitudes of a firm's expected cash inflows and outflows. Assume that Lincoln Co. has the following accounts receivable pattern: Month of sale 50% Month following the sale 50% All sales are on credit. If sales in November and December are budgeted to be $600,000 and $700,000, respectively, the cash expected to be collected in December is $. Lincoln Co. purchases raw materials on account. Lincoln's policy is to take advantage of discounts and pay in the month following the purchase. Some of Lincoln's suppliers do not offer discounts and require payment within the month of purchase. Other suppliers sell on credit terms of 2/10 net 30, which means that Lincoln can take a 2% discount and pay 98% of the invoiced amount if the invoice is paid within 10 days. If the invoice is not paid within 30 days of making the purchase, then Lincoln must pay the full amount (100%) of the invoice. Remember, if Lincoln elects not to take advantage of the discount, then it is good financial practice to delay the payment of an invoice until just before it is due. At the beginning of the year, Lincoln's account payable balance is $60,000. All available discounts have been taken, and the balance will be paid in January. Given the following planned purchases for the next few months, determine the amount of cash that must be available each month to pay for the firm's purchases: Monthly Cash Requirement January February March Planned Purchases Discounted at 2/10 Net 30 70,000 55,000 40,000 Planned Purchases without Discounts 30,000 30,000 30,000