Merrick Company expects to have a cash balance of $46,000 on January 1, 2012.

These
are the relevant monthly budget data for the first two months of 2012.
1. Collections from customers: January $71,000, February $146,000
2. Payments to suppliers: January $40,000, February $75,000
3. Wages: January $30,000, February $40,000. Wages are paid in the month they are
incurred.
4. Administrative expenses: January $21,000, 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, 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.
Merrick 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.

SOLUTION

MERRICK COMPANY
Cash Budget
For the Two Months Ending February 28, 2012

January February

Beginning cash balance........................................................$ 46,000 $ 24,000

Add: Receipts
Collections from customers.....................................71,000 146,000
Sale of short-term investments.............................. 12,000 0
Total receipts......................................................... 83,000 146,000
Total available cash.............................................................. 129,000 170,000
Less: Disbursements Payments to suppliers......................40,000 75,000
Wages.......................................................................30,000 40,000
 Administrative expenses..........................................20,000 23,000
Selling expenses..................................................... 15,000 20,000
Total disbursements...............................................105,000 158,000
Excess (deficiency) of available cash over
disbursements.......................................................................24,000 12,000
Financing
Add: Borrowings........................................................................0 8,000
Less: Repayments........................................................... 0 0
Ending cash balance.............................................................$ 24,000 $ 20,000