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Cash Budget

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Kim incorporated is preparing its master budget for 2004. In addition to the cash flows listed, assume that the company expects to pay $10,000 in income taxes each quarter. Assume Kim expects to paya $20,000 dividend in the 4th quarter. The beg. cash balance is $160,000.

Quarter

1 2 3 4 Year
Cash Collections from Sales Budget
Total Cash Collections 120000 140000 230000 250000 740000

Cash Disbursements from Direct
Materials Budget
Total Cash Disbursements 60000 70000 115000 125000 350000

Direct Labor Disbursements
Total direct labor Disbursements 16000 24000 40000 400000 120000

Manuf. Overhead Disbursements
Cash disbursements for Manuf.
overhead 31000 39000 55000 55000 180000

Selling and Administrative
Disbursements
Cash expenditures for selling
and administrative expenses 29000 31000 35000 35000 130000

A. Create a cash budget for 2004
B. Assume that Kim has $1,000,000 of debt outstanding as of January 1, 2004. given the cash budget should Kim borrow additional funds or repay any of the debt during 2004? Why or Why not?
C. Why is it important to create a cash budget?

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The solution explains how to create a cash budget and explains the importance of cash budget

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