Cash Budgeting Manufacturing Company

Hare Manufacturing Company makes wax for automobiles. As part of overall planning, a cash budget is prepared quarterly each year. You have been asked to assist in preparing the cash budget for the fourth quarter of the company's fiscal year. The following information is available:

a. Sales
Third Quarter (actual)................................................. $180,000
Fourth Quarter (expected)............................................. 175,000

All sales are made on account, with 70% collected in the quarter in which the sales are made and 30% collected during the following quarter.

b. Materials purchases are scheduled as follows:
Third Quarter (actual)...................................................$ 90,000
Fourth Quarter (expected).............................................. 80,000

Materials are purchased on account and paid for at the rate of 80% in the quarter of purchase and 20% in the following quarter.

c. Direct Labor and manufacturing overhead costs (including $6,000 of depreciation) are expected to be $45,000 and $21,000, respectively during the fourth quarter.

d. Selling and administrative expenses are expected to total $27,000 during the fourth quarter including $2,000 in depreciation.

e. Plans have been made to purchase, for cash, $15,000 of equipment during the fourth quarter.

f. the cash balance at the beginning of the quarter is $16,000. The company can borrow money in $1,000 multiples at 12% interest from a local bank. The bank assesses interest for a full quarter, both for the quarter in which the money is borrowed and for the quarter in which it is repaid. All interest is paid at the time of note repayment. The company ran short of cash during the third quarter and had to borrow $8,000 from the bank. The company wishes to maintain a minimum cash balance of $16,000.

Problem:

Prepare a schedule showing the cash budget and financing needs of the Hare Manufacturing Company for the fourth quarter.