Cash Budget Assignment

Prepare a cash budget for 2018 based on the following information:

Cash Receipts

25% of sales are in cash and collected in the month the sale is made and 75% are on credit and collected in the month after the sale. December 2017 sales were $3 million.

Cash Disbursements

The disbursements for this firm are as follows:

Payments for raw materials are calculated based on 50% of current month sales.

Operating expenses are $700,000 per month.

Corporate overhead is $100,000 per month.

$1.5 million semi-annual bond interest payments are due in May and November.

$1.8 million in new equipment will arrive in May and must be paid for in July.

$1.2 million in new equipment will arrive in September and must be paid for in October.

A $1.4 million insurance premium is due in February.

$900,000 quarterly real estate tax payments are due in February, May, August, and November

Cash/Credit Line Information The company must have a minimum cash balance of $200,000 at month-end and the cash balance at the end of December 2017 is $750,000. The company maintains a $1 million credit line for short-term liquidity purposes, none of which is outstanding at the end of December 2017.

DO NOT include interest expense on the credit line in your calculations.

Dec

Jan

Feb

March

April

May

June

July

Aug

Sept

Oct

Nov

Dec

Sales

3,000,000

2,800,000

2,500,000

3,200,000

3,400,000

3,600,000

3,600,000

3,800,000

4,000,000

3,600,000

3,400,000

2,800,000

2,600,000

CASH RECEIPTS

Month of Sale (25%)

First month (75%)

Total Collections

CASH DISBURSEMENTS

Purchases (50%)

Operating expenses

Corporate overhead

Bond interest payment

Equipment purchase

Insurance

Real estate taxes

Total disbursements

Net monthly change

Beginning cash balance

Borrowings (repayments)

Ending cash balance

Cumulative Borrowing