Monthly Cash Budget

Grove, Inc. is a wholesaler for its only product, deluxe wireless electric drills, which sell for $$93$ each and cost Grove $$55$ each. On December $1,$ Grove's management requested a cash budget for December. The following selected account balances at November $30,$ were gathered by the accounting department:

Cash $$135,000$ Marketable securities $($at cost$)210,000$ Accounts receivable $($all trade$)1,710,000$ Inventories $(15,000$ units$)825,000$ Operating expenses payable $140,400$ Accounts payable $($all merchandise$)583,200$ Note payable $($due $12/31)393,000$

Actual sales for the months of October and November were $20,000$ and $30,000$ units, respectively. Projected unit sales for December and January are $50,000$ and $40,000,$ respectively. Experience indicates that $50\%$ of sales should be collected in the month of sale, $30\%$ in the month following sale, and the balance in the second month following sale. Uncollectible accounts, returns, and allowances are negligible.

Planned purchases should provide ending inventories equal to $30\%$ of next month's unit sales volume. Approximately $70\%$ of the purchases are paid for in the month of purchase and the balance in the following month.

Monthly operating expenses are budgeted at $$10\mathrm{.}10$ per unit sold plus a fixed amount of $$189,000$ including depreciation of $$81,000.$ Except for depreciation, $60\%$ of operating expenses are paid in the month incurred and the balance in the following month. Interest expense is included in operating expenses.

Special anticipated year$-$end transactions include the following:

$1.$ Declaration of a $$22,500$ cash dividend to be paid $2$ weeks after the December $20$ date of record.

$2.$ Sale of one$-$half of the marketable securities held on November $30$ a gain of $$21,000$ is anticipated.

$3.$ Pay off the note payable due December $31.$

$4.$ Trade$-$in of an old computer originally costing $$675,000$ and now having accumulated depreciation of $$540,000$ at a gain of $$157,500$ on a new computer costing $$1,355,000.$ Sufficient cash will be paid at the time of trade$-$in so that only $50\%$ of the total price will have to be financed.

$5.$ Grove's treasurer has a policy of maintaining a minimum month$-$end cash balance of $$135,000$ but wants to raise this to $$225,000$ at December $31.$ She has a standing arrangement with the bank to borrow any amount up to a limit of $$450,000.$

Prepare a cash budget for Grove, Inc., for December.

Collections in December from customers:

From October sales From November sales From December sales Total collections

Payments on account for merchandise purchases:

November December Unit Sales Ending inventories Total units to be available Beginning inventories Units to be purchased Total dollar purchases Portion paid in December

Payment of operating expenses:

November December Total variable operating expenses Fixed operating expenses Total operating expenses Monthly depreciation Operating expenses requiring payment Amounts to be paid in December

Cash required at time of computer purchase:

Cost of new computer Book value of old computer Gain on trade$-$in Total trade$-$in allowance Balance owing at trade$-$in Portion to be financed Cash payment required

Grove, Inc.

Cash Budget

For the Month Ended December $31$ Beginning cash balance Cash receipts: Collections from customers $($calculated above$)$ Short$-$term borrowing Cash available Cash disbursements: Payments on accounts payable $($calculated above$)$ Payments of operating expenses payable $($calculated above$)$ Down payment on computer $($calculated above$)$ Total cash disbursements Ending cash balance

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