Data choosen from RedPlasma Corp.:

Month Sales Purchases

February $5,200,000 $4,200,000

March $4,500,000 $3,100,000

April $3,200,000 $1,200,000

May $2,700,000 $ 900,000

June $1,500,000 $ 870,000

Additional Data:

Please!!!, pay attention to the cash expenses and non-cash expenses, and their implication when computing the Cash Budget:

A. The firm collects 75% of sales for cash; and 25% one month later based on past history.

B. Interest Income of $250,000 on Marketable Securities will be received in June.

C. The firm will sell a machinery for cash in $750,000 in April.

D. The firm pays cash for 70% of its purchases (same month).

E. The firm pays for 30% of its purchases the following month.

F. Salaries and Wages amount to 20% of the preceding months sales

G. Sales commissions paid amount to 10% of the preceding months sales

H. Lease Payments of $300,000 must be made each month

I. A principal and interest payment on an Outstanding loan is due in May of $275,000

J. The firm will pay cash dividends of $250,000 at the end of June.

K. Fixed assets costing $1,000,000 in cash will be purchased in May.

L. Depreciation expense is expected to be $100,000 each month.

M. The firm has a beginning cash balance in April of $600,000.

N. The firm maintains a minimum cash balance of $600,000 each month.

Required:

Prepare and Evaluate a Cash Budget for the Months of April, May, and June based on the information shown below, and determine if the firm would have a required financing (deficit) or excess cash balance (surplus) for each period. Then answer the questions.

I. PREPARATION OF CASH BUDGET (Value: 34 points: 53 issues @ .6415each)

FEBRUARY MARCH APRIL MAY JUNE

II. Analyze the results obtained in the Cash Budget in a minimum of two sentences. (4 points)