Answer the following questions including all the formulas and calculations to arrive at financial values. 1. Use Excel to prepare the monthly cash budget with the use of this tamplate.
Answer the following questions including all the formulas and calculations to arrive at financial values. 1. Use Excel to prepare the monthly cash budget with the use of this tamplate.
Chapter4: Financial Planning And Forecasting
Section: Chapter Questions
Problem 5P
Related questions
Question
Cash budgets are essential to all small businesses. In this case, middletown construction company has estimated the following sales
January | $0 |
February | $0 |
March | $275,000 |
April | $275,000 |
May | $312,000 |
June | $417,000 |
July | $714,000 |
August | $611,000 |
September | $827,000 |
October | $500,000 |
November | $116,000 |
December | $0 |
The company also gathered the following collection estimates regarding the forecast sales:
- Payment collection within the month of sale = 20%
- Payment collection the month following sales = 60%
- Payment collection the second month following sales = 20%
Payments for raw materials and labor costs are paid the month after the purchase and are estimated as follows:
March | $220,000 |
April | $240,000 |
May | $225,000 |
June | $287,000 |
July | $350,000 |
August | $415,000 |
September | $242,000 |
October | $214,000 |
November | $222,000 |
Additional financial information is as follows:
- Administrative salaries will approximately amount to $30,000 a month.
- Lease payments are around $10,000 a month.
- A one-time new plant investment for $23,000 is expected to incur and be paid in June.
- Income tax payments estimated to be around $50,000 will be due in both June and September.
- Miscellaneous costs are estimated to be around $5,000 a month.
- Cash on hand on March 1 will be around $50,000, and a minimum cash balance of $50,000 shall be on hand at all times.
Answer the following questions including all the formulas and calculations to arrive at financial values.
1. Use Excel to prepare the monthly
Expert Solution
Step 1
Cash Budget for 10 months from March to December | ||||||||||
Particulars | March | April | May | June | July | August | September | October | November | December |
Opening balance (A) | 50000 | 60000 | 50000 | 50000 | 50000 | 118400 | 50000 | 50000 | 50000 | 50000 |
Collections from Sales (see Working Note) | 55000 | 220000 | 282400 | 325600 | 455400 | 83400 | 142800 | 122200 | 165400 | 100000 |
Total receipts (B) | 55000 | 220000 | 282400 | 325600 | 455400 | 83400 | 142800 | 122200 | 165400 | 100000 |
Payment for Raw Material & Labour | 0 | 220000 | 240000 | 225000 | 287000 | 350000 | 415000 | 242000 | 214000 | 222000 |
Adminstrative Salaries | 30000 | 30000 | 30000 | 30000 | 30000 | 30000 | 30000 | 30000 | 30000 | 30000 |
Lease Payments | 10000 | 10000 | 10000 | 10000 | 10000 | 10000 | 10000 | 10000 | 10000 | 10000 |
One Time Plant Cost | - | - | - | 23000 | - | - | - | - | - | - |
Income Tax Payments | - | - | - | 50000 | - | - | 50000 | - | - | - |
Miscellaneous Cost | 5000 | 5000 | 5000 | 5000 | 5000 | 5000 | 5000 | 5000 | 5000 | 5000 |
Total Payments (C) | 45000 | 265000 | 285000 | 343000 | 332000 | 395000 | 510000 | 287000 | 259000 | 267000 |
Net Cash balance (A+B-C) | 60000 | 15000 | 47400 | 32600 | 173400 | -193200 | -317200 | -114800 | -43600 | -117000 |
Add: Borrowings to maintain min Bal | 0 | 35000 | 2600 | 17400 | 0 | 243200 | 367200 | 164800 | 93600 | 167000 |
Less: Paid back | 0 | 0 | 0 | 0 | 55000 | 0 | 0 | 0 | 0 | 0 |
Closing Balance | 60000 | 50000 | 50000 | 50000 | 118400 | 50000 | 50000 | 50000 | 50000 | 50000 |
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