Relevant data from Picta Company's operating budgets are presented below. The company's financial year ends on 30 June.

Quarter 1 Quarter 2

Sales $248,470 $251,539

Direct material purchases 120,295 128,832

Direct labor 76,553 74,289

Manufacturing overhead 26,000 24,400

Selling and administration expenses 33,500 33,500

Depreciation included in selling

and administration expenses 2,000 2,500

Collection from customers 230,524 220,116

Cash payments for purchases 114,345 118,346

Additional data:

Equipment was sold in July for $8,000 and $4,500 in November. Dividends of $5,500 were paid in August. The beginning cash balance was $80,395 and a required minimum cash balance per quarter is $60,000.

The company has a 15% open line of credit for $70 000 with their bank.

Required:

a) Use this information to prepare a cash budget for the first two quarters of the year.

bi) Briefly comment on Picta Company's expected cashflow position in the first two quarters of the year.

SHOW YOUR WORKING