Answer:
Noble
Monthly Cash Budget for the months of October through December 2014:
October November December
Cash balance on October 1, 2014 $34,000 $129,800 ($56,000)
Total cash received 237,800 110,200 40,800
Total cash available $271,800 $240,000 ($15,200)
Cash payments:
Cash payment for purchases 122,000 257,000 62,000
Salaries 20,000 20,000 20,000
Principal payment 25,700
Interest 9,000
Dividend 15,000
Taxes 19,000
Total cash payments $142,000 $296,000 $131,700
Cash Balance $129,800 ($56,000) ($146,900)
Minimum desired cash balance 15,000
Explanation:
a) Data and Calculations:
1. Sales:
Cash Sales = 20% of Sales
Sales on account = 80%
Credit terms = n/30
2014 Actual 2014 Projected
July August September October November Dec.
Sales: 76,000 88,000 266,000 125,000 51,000
Cash Sales 53,200 25,000 10,200
Cash received on account 212,800 100,000 40,800
Total cash received $237,800 $110,200 $40,800
2. Purchases (all on 60-day terms):
2014 Actual 2014 Projected
July August September October November Dec.
Purchases 116,000 122,000 257,000 62,000 27,000
Cash payment 116,000 122,000 257,000 62,000
3. Other information:
Salaries payable monthly 20,000
Principal payment on debt due in December 25,700
Interest due in December 9,000
Dividend payable in December 15,000
Taxes payable in November 19,000
Addition to accumulated depreciation in December 4,000
Cash balance on October 1, 2014 34,000
Minimum desired cash balance 15,000
b) Noble will enjoy cash surfeit in October only. In November and December, it will be in some serious deficits that require external financing to keep the business afloat. If cash requirement through some external financing is not satisfied in November and December, Noble will not be able to meet with its maturing debt obligations.
