Lillian, John and Burt have been holding preliminary discussions with a view to forming a partnership. All three are attorneys-at-law and have been practising in excess of six years. The position has now been reached where the prospective partners have agreed on the basic arrangements under which the partnership will operate. Law Office Management Accounting And Technology Page 2 of 5 Assignment No. 2 Thursday, January 7, 2021 John offered to do a cash budget for the first year of the partnership. The following information relates to the first quarter. (January, February and March).

Receipts

 Fee income - $600,000 in January, $900,000 in February and $900,000 in March.

 Commission sales on books - $280,000 for January, $320,000 for February and $360,000 for March. Commission is receivable one month following the month of sale.

 Rental income from letting excess office space in the amount of $100,000 for each of the months of January, February & March; due on the 1st of each month.

 Capital contribution - $270,000 in January, $130,000 in February.

 Investment income of $20,000, due in March.

 Loan proceeds of $300,000 from Union Bank to be credited to the Firm’s bank account in January. Payments

 Monthly utilities of $132,000 payable in the month incurred.

 Salaries for the office staff of $300,000 payable in the month incurred.

 Purchase of motor van in the amount of $2,500,000; 50% deposit in February, 25% in March and the balance in April.

 Purchase of computer in January for cash amounting to $500,000.

 Miscellaneous overheads in the amount of $190,000; included in this amount is $130,000 for depreciation.

 The firm invested $300,000 with Bedrock Investment Company in the month of January.

 Monthly payment of wage-related taxes amounted to $60,000 payable one month in arrears.

 Cash purchase of law books amounting to $150,000 in February.

 Payment of monthly interest in the amount of $30,000 starting in February. The partners agreed to contribute $30,000 in total to open the partnership bank account. Law Office Management Accounting And Technology Page 3 of 5 Assignment No. 2 Thursday, January 7, 2021

Required

Prepare a cash budget for the first three months of the year (January, February and March).