Rigley Company expects to have a cash balance of $46,000

Rigley Company expects to have a cash balance of $46,000 on January 1, 2017. These are the relevant monthly budget data for the first two months of 2017.

1. Collections from customers: January $71,000 and February $146,000.

2. Payments to suppliers: January $40,000 and February $75,000.

3. Wages: January $30,000 and February $40,000. Wages are paid in the month they are incurred.

4. Administrative expenses: January $21,000 and February $24,000. These costs include depreciation of $1,000 per month. All other costs are paid as incurred.

5. Selling expenses: January $15,000 and February $20,000. These costs are exclusive of depreciation. They are paid as incurred.

6. Sales of short-term investments in January are expected to realize $12,000 in cash.

Rigley has a line of credit at a local bank that enables it to borrow up to $25,000. The company wants to maintain a minimum monthly cash balance of $20,000.

Instructions

Prepare a cash budget for January and February.

Cash Budget
A cash budget is an estimation of the cash flows for a business over a specific period of time. These cash inflows and outflows include revenues collected, expenses paid, and loans receipts and payment.  Its primary purpose is to provide the...
Line of Credit
A line of credit (LOC) is a preset borrowing limit that can be used at any time. The borrower can take money out as needed until the limit is reached, and as money is repaid, it can be borrowed again in the case of an open line of credit. A LOC is...

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