Q28E
Question
Preparing the financial budget—cash budget
Use the original schedule of cash receipts completed in Exercise E22-26, Requirement 1, and the schedule of cash payments completed in Exercise E22-27 to complete a cash budget for Marcel Company for January, February, and March.
Additional information: Marcel’s beginning cash balance is \(5,000, and Marcel desires to maintain a minimum ending cash balance of \)5,000. Marcel 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 amounts borrowed is 8% per year. Interest is paid at the beginning of the month on the outstanding balance from the previous month.
Step-by-Step Solution
VerifiedAnswer
The balances in prepaid property taxes, accounts payable, and utilities payable are $3,330, $4,800, $900.
Particulars | January | February | March |
Beginning cash balance | $5,000 | $5,380 | $5,010 |
Cash receipts | $8,960 | $12,080 | $11,340 |
Cash payments: | |||
Direct materials | $0 | $3,100 | $3,500 |
Direct labor cost | $3,300 | $3,500 | $3,600 |
Utilities for plant | $0 | $650 | $650 |
Property taxes on plant | $200*12 =$2,400 | - | - |
Utilities for office | $0 | $250 | $250 |
Property taxes on office | $170*12 =$2,040 | - | - |
Office salaries | $3,500 | $3,500 | $3,500 |
Total cash payments | $14,340 | $14,500 | $16,300 |
Ending cash balance before financing | (380) | $2,960 | $50 |
Minimum cash balance desired | ($5,000) | ($5,000) | ($5,000) |
Projected cash excess (deficiency) | ($5,380) | ($2,960) | ($4,950) |
Financing (borrowing) | $5,380 | $2,050 | $4,950 |
Ending cash balance | $5,380 | $5,010 | $5,000 |
Prepaid property taxes = (tax on office+ tax on plant)*9
= ($200+$170)*9
= $3,330
Accounts payable = $ 4,800
Utilities payable = Utilities on office+ utilities on plant
= $650 + $250
= $900