Cash Budget—Financing Effects You are a relatively recent hire to Hartz & Co., a local manufacturer of plumbing supply products. You have been asked to prepare a condensed statement ofcash flows for the months of November and December of the current year for presentation to thecompany’s management.Assume the cash balance at November 1 will be $75,000. It is the company’s policy to maintaina minimum cash balance of $50,000 at the end of each month. Cash receipts (from cash salesand collection of accounts receivable) are projected to be $525,000 for November and $450,000for December. Cash disbursements (sales commissions, advertising, delivery expense, wages,utilities, etc.) prior to financing activity are scheduled to be $450,500 in November and $550,000in December.Short-term borrowing, when needed, is done at the beginning of the month in increments of$1,000. The annual interest rate on any such loans is estimated to be 12%. Interest on any outstanding short-term loans is paid in cash at the end of the month. Repayments of principal (if any) areassumed to occur at the end of the month. As of November 1, the company has a $50,000 long-termloan from the local bank. This loan, including interest (at 12% per year) for the month of November,is payable at the end of November.Required Use the preceding information to prepare the cash budget for November and December. (Hint:The December 31 cash balance should be $50,480.)
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
cash flows for the months of November and December of the current year for presentation to the
company’s management.
Assume the cash balance at November 1 will be $75,000. It is the company’s policy to maintain
a minimum cash balance of $50,000 at the end of each month. Cash receipts (from cash sales
and collection of
for December. Cash disbursements (sales commissions, advertising, delivery expense, wages,
utilities, etc.) prior to financing activity are scheduled to be $450,500 in November and $550,000
in December.
Short-term borrowing, when needed, is done at the beginning of the month in increments of
$1,000. The annual interest rate on any such loans is estimated to be 12%. Interest on any outstanding short-term loans is paid in cash at the end of the month. Repayments of principal (if any) are
assumed to occur at the end of the month. As of November 1, the company has a $50,000 long-term
loan from the local bank. This loan, including interest (at 12% per year) for the month of November,
is payable at the end of November.
Required Use the preceding information to prepare the cash budget for November and December. (Hint:
The December 31 cash balance should be $50,480.)
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