Question
A&B enterprises are currently creating estimates for the first quarter of the upcoming year. The following estimated data relates to A&B enterprises 1. Estimated cash
A&B enterprises are currently creating estimates for the first quarter of the upcoming year. The following estimated data relates to A&B enterprises 1. Estimated cash balance on January 1st 20XX: $190,000 2. Estimated accounts receivable balance on January 1st 20XX: $185,000 3. Budgeted sales: i. January: $540,000 ii. February: $620,000 iii. March: $485,000 4. A&B expects to sell 25% of its merchandise for cash. 5. A&B expects to collect 50% of its credit sales in the month of sale and the remainder in the next month. 6. Estimated accounts payable on January 1st 20XX: $90,000 7. Budgeted manufacturing costs: i. January: $420,000 ii. February: $390,000 iii. March: $400,000 8. Depreciation expenses on plant and equipment are estimated at $16,000 per month and are included in the manufacturing costs. 9. The estimated accounts payable balance relates only to manufacturing costs. A&B expects to pay 65% of the manufacturing costs in the month in which these costs are incurred and the remaining amount will be paid in the following month. 10. A&B expects to purchase a photocopier in February 20XX: $60,000 11. Estimated income taxes to be paid in March 20XX: $80,000 12. Estimated rent revenue to be received in February 20XX: $16,000 13. Estimated interest expense to be paid in January 20XX: $14,000 14. Estimated selling and administrative expenses paid in the month incurred: i. January: $70,000 ii. February: $80,000 iii. March: $65,000 15. A&B estimates that they will require a minimum cash balance of $300,000 at the end of each month. 16. Arrangements for a loan facility of $500,000 for the quarter have been made with the company's bankers. Loans are accessed at the beginning of each month and repayments are made at the end of each month. 17. Interest on the loan is incurred at a rate of 15% per annum.
Required: Prepare the cash budget for A&B enterprises for the quarter ending March 31,20XX.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started