Back to Assignment Attempts 0.8 Keep the Highest 0.8/3 3. Budgeting for cash Which of the following statements are true with regard to a cash budget? Check all that apply. A cash budget provides information about a company's ability to repay its loans or meet its other obligations. Cash budgets provide less specific Financial Information than the percentage-of-sales method and the statement of cash flows. A cash budget is a forecasted statement that shows how a company's cash will be obtained and how it will be spent. The single biggest disadvantage of the cash budget is that it is not useful in identifying a firm potential cash shorta Assume that Lincoln Co has the following accounts receivable pattern B0% Month of sale Month following the sale 20% All sales are on credit. It sales in November and December are budgeted to be $900,000 and $1,000,000, respectively, the cash expected to be collected in December is Lincoln Co. purchases raw materais on account. Some of Uncin's suppliers do not offer discounts and require payment the month following the purchase. Other suppliers selon credit terms of 2/10 net 30, which means that Lincoln can take a 2% discount and pay 98% of the invoiced amount 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 Chapter 15 Assignment Month of sale 80% Month following the sale 20% All sales are on credit. If sales in November and December are budgeted to be $900,000 and $1,000,000, respectively, the cash expected to be collected in December is Lincoln Co. purchases raw materials on account. Some of Uncoln's suppliers do not offer discounts and require payment the month following the purchase. Other suppliers selt 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. Lincoln's policy is to take advantage of available cash discounts by paying on day 10 and to make payments to suppliers who do not offer discounts on day 30 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 $40,000 $40,000 $55,000 Planned Purchases without Discounts $30,000 $30,000 $60,000 Grade it Now Save & Continue Continue without saving