Text: Some Company
Cash Budget Given Information
For the Year Ended December 31, 2020
Some Company has asked you to prepare a cash budget for the year
2020 using the following information:
Projected cash balance at January 1
$50,000
Cash balance desired December 31
$65,000
Projected sales by quarter (collected 70% in the quarter of sale
and 20% in the quarter after sale, with the remaining 10%
uncollectible):
Accounts receivable from 4th quarter 2019 (of which $20,000 is collectible
and $10,000 is uncollectible)
$30,000
Sales Quarter 1
$145,000
Sales Quarter 2
$250,000
Sales Quarter 3
$160,000
Sales Quarter 4
$240,000
Projected 2020 sale of excess land:
Original cost
$40,000
Accumulated depreciation
$0
Book value
$40,000
Cash expected to be received
$75,000
Gain on sale expected
$35,000
Expected federal income tax refund from 2020 correction of error on 2018 tax
return
$14,000
Projected 2020 transactions, to be paid in 2020, unless otherwise
noted:
Purchases of merchandise inventory
$410,000
Operating expenses:
Sales and office salaries
$121,000
Office utilities
$9,000
Insurance expense (taken from Prepaid
Insurance)
$6,500
Depreciation of building and
equipment
$55,000
Amortization of copyright
$15,000
Purchases of office equipment
$20,000
Cash dividend (declared in December 2020; to be paid in January
2021)
$28,000
The company has a line of credit at the bank which allows borrowing
up to $500,000. Currently, the company has loans of $250,000 taken
out two years ago at 10% interest. Interest is due quarterly on
March 31, June 30, September 30, and December 31.
The amounts are listed in the above problem: "Some Company has
asked you to prepare a cash budget for the year 2020 using the
following information