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ACCT504 Practice Case Study 3 on Cash Budgeting

A practice case study focused on cash budgeting principles, applying real-world financial data for analysis.

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    ACCT 504 Practice Case Study 3 on Cash Budgeting This is a practice case study to help you become familiar with how to create a comprehensive cash budget. The cash budget relates to TCO D and is discussed in Chapter 4 . The actual case study assignment should be uploaded to the Week 6 Assignment Dropbox by 11:59 p.m. m ountain time on Sunday at the end of Week 6 . You are encouraged to use the Excel template file provided in Doc Sharing. The Cambridge Company has bud geted sales revenues as follows. Jan Feb Mar __ Credit sales $45,000 $36,000 $27 ,000 Cash sales 27 ,000 76,5 00 58,5 00 Total sales $72 ,000 $112,5 00 $85,5 00 Past experience indicates that 60% of the credit sales will be collected in the month of sale and the remaining 40% will be collected in the following month. Purchases of i nventory are all on credit ; 4 0% is paid in the month of purchase and 6 0% i n the month following purchase. Budgeted invento ry purchases are $97,500 in January, $67,500 in February, and $31,500 in March . Other budgeted cash receipts: (a) sale of pla nt assets for $18,525 in February , and (b) sale of new co mmon stock for $25,275 in March . Other budgeted cash disbursements: (a) operating expenses of $10,125 each month, (b) selling and ad ministrative expenses of $18,750 each month, (c) dividends of $28,500 will be paid in February , and (d) purchase of equipment for $9,000 cash in March . The company has a cash balance of $15,000 at the beginning of February and wishes to mainta in a minimum cash balance of $15 ,000 at the end of each month. An open line of credit is available at the bank and carries an annual interest rate of 12%. Assume that all borrowing is done on the first day of the month in which financing is needed and that all repayments are made on the last day of the month in which excess cash is available. Also assume that there is no outstanding f inancing as of February 1. Requirements: 1. Use this information to prepare a c ash b u dget for the months of February and March , using the template provided in Doc Sharing. Answer: February: • Beginning Cash Balance : $15,000

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