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 following month.
• Credit purchases will be paid in the month following the purchase.
• In December 2019, credit sales were 210,000 and credit purchases were 156,000.
• Cash balance at 1 January 2020 is 280,000.

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

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