# Question

Given the following information, construct the firm’s cash budget for the given months and answer the questions.

• All sales are for credit and collections occur after 30 days.

• A $100,000 Treasury bill matures in March.

• Monthly fixed disbursements are $25,000.

• Variable disbursements are 40 percent of sales and occur one month prior to sales. (Variable cash disbursements are given for April.)

• A tax payment of $30,000 is due in April.

• A payment of $50,000 is to be received in February.

• The initial cash is $20,000.

• The minimum required cash balance is $10,000.

a. At the end of March, what are the firm’s (1) accounts receivable, (2) marketable securities, and (3) accounts payable?

b. What is the maximum amount that the firm may have to borrow? If your answer is “None,” give a reason that verifies your answer.

c. If the firm used accelerated depreciation instead of straight-line depreciation, how would that affect the cash budget?

• All sales are for credit and collections occur after 30 days.

• A $100,000 Treasury bill matures in March.

• Monthly fixed disbursements are $25,000.

• Variable disbursements are 40 percent of sales and occur one month prior to sales. (Variable cash disbursements are given for April.)

• A tax payment of $30,000 is due in April.

• A payment of $50,000 is to be received in February.

• The initial cash is $20,000.

• The minimum required cash balance is $10,000.

a. At the end of March, what are the firm’s (1) accounts receivable, (2) marketable securities, and (3) accounts payable?

b. What is the maximum amount that the firm may have to borrow? If your answer is “None,” give a reason that verifies your answer.

c. If the firm used accelerated depreciation instead of straight-line depreciation, how would that affect the cash budget?

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