# Question: Xeriscape Nurseries Inc has four divisions The corporation s controller has

Xeriscape Nurseries, Inc., has four divisions. The corporation’s controller has been asked to prepare a cash budget for the Northern Division for the first quarter. Projected data supporting this budget follow.


Collection records of accounts receivable have shown that 40 percent of all credit sales are collected in the month of sale, 50 percent in the month following the sale, and 8 percent in the second month following the sale; 2 percent of the sales are uncollectible. All purchases are paid for in the month of the purchase. Salaries and wages are projected to be \$25,000 in January, \$33,000 in February, and \$21,000 in March. Estimated monthly costs are utilities, \$4,220; collection fees, \$1,700; rent, \$5,300; equipment depreciation, \$5,440; supplies, \$2,480; small tools, \$3,140; and miscellaneous, \$1,900. Each of the corporation’s divisions maintains a \$10,000 minimum cash balance and can borrow from the bank in multiples of \$100, as needed. As of December 31, the Southern Division had a cash balance of \$10,000.

Required
1. Prepare a monthly cash budget for Xeriscape Nurseries’ Northern Division for the first quarter.
2. Should Xeriscape Nurseries anticipate taking out a loan for the Northern Division during the quarter? If so, how much should it borrow, andwhen?
View Solution:

Sales37
Views688