Problem 4

Cash Budget

The Modern Electronics Company has the following information relating to their cash budget:

	October	November
Cash collections from customers	$258,000	$270,000
Cash payments for inventory purchases	110,000	71,000
Cash payments for direct labor	120,000	130,000
Cash payments for selling and administrative Expenses	19,000	19,000
Cash payments of dividends	41,000
Cash payment for purchase of new computer		12,000

The company wishes to maintain a minimum cash balance of $20,000 at the end of each month. The company borrows money from the bank at 9% interest if necessary to maintain the minimum cash balance. Borrowed money is repaid in months when there is an excess cash balance. The beginning cash balance on October 1 was $20,000.

INSTRUCTIONS

Prepare a cash budget for the months of October and November. Show headings and labels.

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