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CASE 2 (20 points) Here are some important figures from the budget of Marvin Corporation for the first quarter of 2020: January February March Credit

CASE 2 (20 points)

Here are some important figures from the budget of Marvin Corporation for the first quarter of 2020:

January

February

March

Credit sales

380,000

396,000

438,000

Credit purchases

147,000

175,500

200,500

Cash disbursements:

Wages, taxes, and expenses

39,750

48,210

50,300

Interest

11,400

11,400

11,400

Equipment purchases

83,000

91,000

0

Additional information:

  • The company predicts that 5 percent of its credit sales will never be collected, 35 percent of its sales will be collected in the month of the sale, and the remaining 60 percent will be collected in the followingmonth.
  • Credit purchases will be paid in the month following thepurchase.
  • In December 2019, credit sales were 210,000 and credit purchases were156,000.
  • Cash balance at 1 January 2020 is280,000.

Instructions:

  1. Using the above information, complete the following cash budget.(15 points)

January

February

March

Beginning cash balance

Cash receipts:

Cash collections from credit sales

Total cash available

Cash disbursements:

Purchases

Wages, taxes, and expenses

Interest

Equipment purchases

Total cash disbursements

Ending cash balance

  1. Discuss the role of cash budget. (5 points)

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