Salam company is planning its cash needs for the fourth quarter.
The following information has been assembled to assist in preparing a cash budget for the quarter:
a. The Total cash collections and disbursement for purchases are as follows (All amounts are in dollars):
Oct Nov Dec
Total Cash collection 46,500 49,760 59,600
Total Cash disbursement for Purchases36,000 36,750 30,375
b. Selling and administrative expenses will be incurred as follows:
Selling expenses 7,200 11,700 8,000
Administrative expenses 5,600 7,200 6,100
c. Land costing $4,500 will be purchased in October.
d. Dividends of $1,000 will be declared and paid in November.
e. The cash balance on October 1st is $10,000.
f. The company must maintain a cash balance of at least $15,000 at the end of each month.
g. The company has an agreement with a local bank that allows it to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 12% per year. The company would repay the loan plus accumulated interest at the end of the quarter.
1. A cash budget