P10-43A The Big Sister Company is in a seasonal business and prepares quarterly budgets. Its fiscal year runs from (SO 4) January 1 through December 31. Production occurs only in the first quarter (January to March), but sales take place Prepare a cash budge throughout the year. The sales forecast for the coming year shows the following: for a year First quarter Second quarter $480,000 300,000 Third quarter Fourth quarter $480,000 480,000 There are no cash sales, and the beginning balance of receivables is expected to be collected in the first quarter. Subsequent collections are two thirds in the quarter when sales take place and one third in the following quarter The company makes material purchases valued at $400,000 in the first quarter, but makes no purchases in the last three quarters. It makes payment when it purchases the materials Direct labour of $350,000 is incurred and paid only in the first quarter. Factory overhead of $340,000 is also incurred and paid in the first quarter, and is at a standby level of $100,000 during the other three quarters. Selling and administrative expenses of $35,000 are paid each quarter throughout the year. Big Sister has an operating line of credit with its bank at an interest rate of 5% per annum. The company plans to keep a cash balance of at least S 10,000 at all times, and it w ill borrow and repay in multiples of $5,000. It makes all borrowings at the beginning of a quarter, and makes all payments at the end of a quarter. It pays interest only on the portion of the loan that it repays in a quarter. The company plans to purchase equipment in the second and fourth quarters for $70,000 and $150,000, respectively The cash balance on January 1 is $25,000 and accounts receivable total $150,000 Instructions Prepare a cash budget for the year. Show receipts, disbursements, the ending cash balance before borrowing, the amounts Ending cash balance borrowed and repaid, interest payments, and the ending cash balance. $11,688 (adapted from CMA Canada, now CPA Canada)