Cash Budget: Additional Practice Problem The CPA Company has planned the following sales for the next three months: Month January February March Budgeted Sales $50,000 $60,000 S80,000 Sales are made 25 percent for cash and 75 percent on account. From experience, the company has learned that a month's sales on account are collected according to the following pattern: Month of sale 50% First month following sale 40% Second month following sale 6% Uncollectible 4% The company requires a minimum cash balance of $8,000 to start a month. Required: a. Compute the budgeted cash receipts for March b. Assume the following additional information: Budgeted expenses for March: Inventory purchases (paid in month of purchase) $30,000 Depreciation expense 6,000 Operating expenses (salaries, etc.) 55.000 Dividends paid 5,000 Cash balance, February 28th 8,750 Amortization expense 7,000 Using this information, along with necessary information given or computed in part (a) above, prepare a cash budget in good form for the month of March. Clearly show any borrowing needed during the month. The company can borrow in any dollar amount. Required: 1. Prepare the budgeted cash receipts for March CPA Company Budgeted Cash Receipts for March From: Schedule 1 $ Jan. : Feb: S Mar: Total HW 2. Prepare a cash budget for the month of March, include any borrowing needed during the month CPA Company Cash Budget for the Month of March Beginning Balance: Add: [Schedule 1] Total Available Cash Disbursements: Ending Cash Balance Minimum Cash Balance Borrow 3. If a company determines that its minimum cash balance will not be maintained during a certain month, what recommendation(s) would you make to management? 4. If a company determines that it will have a much greater cash balance than its minimum cash balance during a certain month, what recommendation(s) would you make to management? 88