Reference no: EM132497374

Month                                    Sales                                Purchases

August                           $3,800,000                      $3,200,000

September                       $3,100,000                    $1,700,000

October                      $1,600,00                           0 $ 975,000

November                         $1,150,000                       $ 700,000

December                         $1,200,000                        $ 700,000

Additional Data:

pay attention to the cash expenses and non-cash expenses, and their implication when computing the Cash Budget:

1. The firm collects 60% of sales for cash; and 40% one month later based on past history.

2. Interest Income of $80,000 on Marketable Securities will be received in December.

3. The firm will sell a machinery for cash in $575,000 in October.

4. The firm pays cash for 60% of its purchases (same month).

5. The firm pays for 40% of its purchases the following month.

6. Salaries and Wages amount to 15% of the preceding months sales

7. Sales commissions paid amount to 10% of the preceding months sales

8. Lease Payments of $275,000 must be made each month

9. A principal and interest payment on an Outstanding loan is due in December of $300,000

10. The firm will pay cash dividends of $150,000 at the end of December.

11. Fixed assets costing $700,000 in cash will be purchased in November.

12. Depreciation expense is expected to be $50,000 each month.

13. The firm has a beginning cash balance in October of $300,000.

14. The firm maintains a minimum cash balance of $300,000 each month.

Required:

Question 1: Cash Budget for the Months of October, November, and December based on the information shown below, and determine if the firm would have a required financing (deficit) or excess cash balance (surplus) for each period