Cash Budget Analysis

CDLater's projected sales for the first four
months of 201X are:
January $60,000
February $55,000
March $65,000
April $70,000
The firm expects to collect 10 percent of sales in cash, 60 percent in
one month, and 25 percent in two months with 5 percent in uncollectible
bad debts. Sales for the previous November and December
were $55,000 and $80,000, respectively.
The firm buys raw materials thirty days prior to expected sales;
that is, the materials for January are bought by the beginning of
December with payment made by the end of December. Materials
costs are 58 percent of sales.
Wages for the months of January, February, and March are
expected to be $6,000 per month. Other monthly expenses
amount to $5,000 a month and are paid in cash each month.
Taxes due for an earlier quarter are paid in the second month of
the succeeding quarter. The taxes due for the prior quarter were
$9,000.
The firm plans to buy a new car in January for $18,000. An old
vehicle will be sold for a net amount of $2,000. A note of $10,000
will be due for payment in February. A quarterly loan installment
payment of $7,500 is due in March.
The beginning cash balance in January is $8,000. The company
policy is to maintain a minimum cash balance of $5,000. It has an
outstanding loan balance of $10,000 in December. Should the firm
need to borrow to meet expected monthly shortfalls, the interest
cost is 1.5 percent per month and is paid each month on the total
amount of borrowed funds outstanding at the end of the previous
month.
Prepare a monthly cash budget for January, February, and March.