Felasco Nurseries Inc_Cash Budget

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Description

Basic
Cash Budget

P 3.
Felasco Nurseries Inc. has been in business for six years and has four divisions.
Ethan Poulis, the corporation’s controller, has been asked to prepare a cash
budget for the Southern Division for the first quarter. Projected data
supporting this budget follow.

Sales
(60% on credit) Purchases

November

$160,000

December

$
86,800

December

200,000

January

124,700

January

120,000

February

99,440

February

160,000

March

104,800

March

140,000

Collection
records of accounts receivable have shown that 30 percent of all credit sales
are collected in the month of sale, 60 percent in the month following the sale,
and 8 percent in the second month following the sale; 2 percent of the sales
are uncollectible. All purchases are paid for in the month after the purchase.
Sala­ries and wages are projected to be $25,200 in January, $33,200 in
February, and $21,200 in March. Estimated monthly costs are utilities, $4,220;
collection fees, $1,700; rent, $5,300; equipment depreciation, $5,440;
supplies, $2,480; small tools, $3,140; and miscellaneous, $1,900.

Each
of the corporation’s divisions maintains a $6,000 minimum cash bal­ance. As of
December 31, the Southern Division had a cash balance of $9,600.

Required

1. Prepare a monthly cash budget for Felasco
Nurseries’ Southern Divisiontor the first quarter.

2.
Should Felasco Nurseries anticipate taking out a loan for the Southern
Divi­sion during the quarter? If so, how much should it borrow, and when?

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