Xeriscape Nurseries, Inc., has four divisions. The corporations controller has been asked to prepare a cash budget
Question:
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 corporations 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?
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that... 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...
Step by Step Answer:
Principles of Accounting
ISBN: 978-1133626985
12th edition
Authors: Belverd E. Needles, Marian Powers and Susan V. Crosson