Question
Here are some important figures from the budget of Nechako Nougats Inc. for the first quarter of 2020: January February March Credit sales $400,500 $340,000
Here are some important figures from the budget of Nechako Nougats Inc. for the first quarter of 2020:
| January |
| February |
| March |
| |
Credit sales |
| $400,500 |
| $340,000 |
| $520,500 |
|
Credit purchases |
| 150,900 |
| 165,300 |
| 160,300 |
|
Cash disbursements |
|
|
|
|
|
|
|
Wages, taxes, and expenses |
| 40,040 |
| 65,000 |
| 60,100 |
|
Interest |
| 12,580 |
| 10,580 |
| 13,000 |
|
Equipment purchases |
| 75,800 |
| 115,000 |
| 15,000 |
|
The company predicts that 5% of its credit sales will never be collected, 45% of its sales will be collected in the month of the sale, and the remaining 50% will be collected in the following month. Credit purchases will be paid in the month following the purchase.
Cash in the beginning of the first quarter is $200,000.
In December 2019, credit sales were $250,000, and credit purchases were $160,000. Assume that the minimum cash balance for each month is $150,000.
- Using this information, prepare the cash budget.
- Compute the cash surplus (deficit) for each month.
- What would be your analysis based on this first-quarter budget?
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