Required: Prepare and Evaluate a Cash Budget for the Months of October, November, and December based on the information shown below, and determine if the firm would have a required financing (deficit) or excess cash balance (surplus) for each period.

Data choosen

Month Sales Purchases

August $3,500,000 $3,000,000

September $3,000,000. $1,600,000

October $2,000,000. $ 975,000

November $1,500,000 $ 750,000

December $1,000,000 $ 800,000

1. The firm collects 70% of sales for cash; and 30% one month later based on past history.

2. Interest Income of $80,000 on Marketable Securities will be received in December.

3. The firm will sell a machinery for cash in $575,000 in October.

4. The firm pays cash for 60% of its purchases (same month).

5. The firm pays for 40% of its purchases the following month.

6. Salaries and Wages amount to 15% of the preceding months sales

7. Sales commissions paid amount to 10% of the preceding months sales

8. Lease Payments of $250,000 must be made each month

9. A principal and interest payment on an Outstanding loan is due in December of $220,000

10. The firm will pay cash dividends of $200,000 at the end of December.

11. Fixed assets costing $800,000 in cash will be purchased in November.

12. Depreciation expense is expected to be $100,000 each month.

13. The firm has a beginning cash balance in October of $300,000.

14. The firm maintains a minimum cash balance of $300,000 each month.