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    Cash Budget

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    I need to make a budgeted statement of cash receipts for the months of January thru March 2005 for:

    Victoria Kite Company sells kites on the web wants a master budget for the next three months beginning January 1, 2005.

    1) It desires an ending minimum cash balance of $5,000 each month

    2) Sales forecasted at an average wholesale selling price of $8 per kite. In January, Vcitoria Kiet is beginning just-in-time (JIT) deliveries from suppliers, which menas that purchases equal expected sales

    3) On january 1, purchases will cease until inventory reaches $8,000, after which time purchases will equal sales. Merchandise costs average $4 perkite.

    4) Purchases during any given month are paid in full during the following month.

    5) All sales are on credit, payable within 30 days, but experience has shown that: 60% of current sales are collected in the current month, 30% in the next month, and 10% in the month thereafter. Bad debts are negligible.

    6) Monthly operating expenses are as follows: Wages and salaries $15,000; Insurance expired 125; Depreciation 250; Miscellanesou 2,500; Rent 250/months + 10% of quarterly sales over 10,000

    7) Cash dividends of $1,500 are to be paid quarterly, beginning January 15, and are declared on the fifteenth of thie previous month

    8) All operating expenses are paid as incurred, except insurance, depreciation and rent.

    9) Rent of $250 is paid at the beginning of each month and the additional 10% of sales is paid quarterly on the tenth of the month following the end of the quarter. The next settlement is due January 10.

    10) The company plans to buy some new fixtures for $3,000 cash in March

    11) Money can be borrowed and repaid in multiples of $500 at an interest rate of 10% per annum. Management wants to minimize borrowing and repay rapidly. Interest is computed and paid when the principal is repaid.

    11A) Assume that borrowing occurs at the beginning, and repayments at the end of the months in question.

    11B) Money is never borrowed at the beginnina dn repaid at the end of the same month. Compute interest to the nearest dollar.

    12) Assets as pf December 31, 2004: Cash $5,000; Accounts receivable $12,500;;; Inventory* 39,050; Unexpired insurance 1,500; fixed assets, net 12,500; Total $70,550

    13) Liabilities as of December 31,2004; Accounts payable {merchandise} $35,550; Dividends payable 1,500; rent payable 7,800; Total $44,850

    14) November 30 inventory balance= $16,000

    15) Recent and forecasted sales; October $38,000; November $25,000; December $25,000;; January $62,000; Februaru $75.000; March $38,000; April $45,000. Required

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    Solution Summary

    The solution explains how to prepare a cash budget for Victoria Kite Company

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