company wants to maintain a minimum monthly cash balance of $25,000. Any ex- cess cash above the $25,000 minimum is used to pay off the line of credit. Instructions (a) Prepare a cash budget for January and February. (a) Jan. cash bal. $25,000 (b) Explain how a cash budget contributes to effective management. Prepare a cash budget. P7-7B Ybarra Inc. prepares monthly cash budgets. Shown on page 378 are relevant (SO 8) data from operating budgets for 2010. 78 chapter 7 Fraud, Internal Control, and Cash Sales Purchases Salaries Selling and administrative expenses January $330,000 110,000 80,000 135,000 February $400,000 130,000 95,000 150,000 All sales and purchases are on account. Collections and disbursement data are given below. All other items above are paid in the month incurred. Depreciation has been excluded from selling and administrative expenses. Other data 1. Collections from customers: January $297,000; February $358,000. 2. Payments for purchases: January $98,000; February $118,000. 3. Other receipts: January: collection of December 31, 2009, interest receivable $2,000; February: proceeds from sale of short-term investments $8,000 4. Other disbursements: February payment of $20,000 for land The company's cash balance on January 1, 2010, is expected to be $60,000. The co wants to maintain a minimum cash balance of $40,000. Instructions Prepare a cash budget for January and February. 1.31 cash bal. $46,000