Reference no: EM132842031

Salam company is planning its cash needs for the fourth quarter.

The following information has been assembled to assist in preparing a cash budget for the quarter:

a. The Total cash collections and disbursement for purchases are as follows (All amounts are in dollars):

                                                                               Oct                 Nov                 Dec

Total Cash collection                               46,500           49,760            59,600   

Total Cash disbursement for Purchases36,000          36,750             30,375          

b. Selling and administrative expenses will be incurred as follows:

 Selling expenses                                           7,200           11,700              8,000

Administrative expenses                              5,600             7,200              6,100

c. Land costing $4,500 will be purchased in October.

d. Dividends of $1,000 will be declared and paid in November.

e. The cash balance on October 1st is $10,000.

f. The company must maintain a cash balance of at least $15,000 at the end of each month.

g. The company has an agreement with a local bank that allows it to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 12% per year. The company would repay the loan plus accumulated interest at the end of the quarter.

Required: Prepare:

1. A cash budget