cash budget.doc
TRANSCRIPT
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8/17/2019 Cash Budget.doc
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Cash Budget
To illustrate the cash budget, let’s extend the ABT example by assuming the
following:
A. ABT requires a $!!,!!! minimum cash balance for the end of eachquarter. "n
#ecember , %!!&, the cash balance was $%!,!!!.B. 'oney can be borrowed and repaid in multiples of $!!,!!!. (nterest is
% percent
per year. (nterest payments are made only for the amount of the
principal being
repaid. All borrowing ta)es place at the beginning of a quarter, and all
repayment
ta)es place at the end of a quarter.
*. +alf of all sales are for cash half are on credit. "f the credit sales, -!percent are
collected in the quarter of sale, and the remaining ! percent are
collected in the
following quarter. The sales for the fourth quarter of %!!& were $%
million.#. urchases of materials are made on account /! percent of purchases
are paid for in
the quarter of purchase. The remaining %! percent are paid in the
following quarter.
The purchases for the fourth quarter of %!!& were $0!!,!!!.1. Budgeted depreciation is $%!!,!!! per quarter for o2erhead.3. The capital budget for %!! re2ealed plans to purchase additional
equipment to
handle increased demand at a small plant in 4e2ada. The cash outlay
for the equipment, $5!!,!!!, will ta)e place in the 6rst quarter. The
company plans to 6nance the acquisition of the equipment with
operating cash, supplementing it with short7term loans as necessary.8. *orporate income taxes are approximately $5!!,!!! and will be paid
at the end of
the fourth quarter 9refer to chedule ;.
8i2en the preceding information, the cash budget for ABT is shown in
chedule % 9all
6gures are rounded to the nearest thousand;.
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*ash out