Answered: Complete a Cash Budget for Lindor…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter8: Budgeting For Planning And Control

Section: Chapter Questions

Problem 34E: A companys sales for the coming months are as follows: About 20 percent of sales are cash sales, and...

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Question

Lindor Enterprises projects sales for the first three months of the year to be: $10,100 in January, $12,400 in February, and $12,900 in March. Cash receipts are expected to be: $8,450 in January, $11,770 in February, and $12,810 in March.

They anticipate the following cash payments:

Lindor Enterprises	January	February	March
Direct materials purchased	$3,500	$4,000	$4,900
Direct labor costs	$3,000	$4,100	$3,600
Depreciation on plant	$510	$510	$510
Utilities for plant	$650	$650	$650
Property taxes on plant	$140	$140	$140
Depreciation on office	$560	$560	$560
Utilities for office	$370	$370	$370
Property taxes on office	$170	$170	$170
Office salaries	$2,900	$2,900	$2,900

All costs are paid in the month incurred except: direct materials, which are paid in the month following the purchase; utilities, which are paid in the month after incurred; and property taxes, which are prepaid for the year on January 2. The Accounts Payable and Utilities Payable accounts have a zero balance on January 1.

Also, Lindor Enterprises beginning cash balance is $3,100 and they desire to maintain a minimum ending cash balance of $3,100. Lindor Enterprises borrows cash as needed at the beginning of each month in increments of $1,000 and repays the amounts borrowed in increments of $1,000 at the beginning of months when excess cash is available. The interest rate on borrowed amounts is 7% per year. Interest is paid at the beginning of the month on the outstanding balance from the previous month.

Complete a Cash Budget for Lindor Enterprises.

Lindor EnterprisesCash BudgetFor the Quarter Ending March 31

	January	February	March	Total
Beginning cash balance
Cash receipts
Cash available
Cash payments:
Purchases of direct materials
Direct labor
Manufacturing overhead
Selling and administrative expenses
Interest expense
Total cash payments
Ending cash balance before financing
Minimum cash balance desired
Projected cash excess (deficiency)
Financing:
Borrowing
Principal repayments
Total effects of financing
Single lineEnding cash balance