Reference no: EM133022453

Question - Consider the following cash budgeting example for Silverlake Pharmaceutical Company. After referring to the information provided below, prepare a cash budget for the company for the period July to December 2018. All dollar amounts are in thousands.

Gross sales by month

May 2018 $5,000

June 5,000

July 10,000

August 15,000

September 20,000

October 10,000

November 10,000

December 5,000

January 2019 10,000

All sales transactions are on credit, with historical data showing that 30% of current revenues are collected in the current month, 50% in the next month and 20% in the second month after sale. Assume that bad debt is negligible.

Except for supplies, assume that operating expenses are paid during the month they are incurred.

Operating expenses (monthly unless indicated otherwise) for the period:

Wages and salaries: $750

Insurance 250

Depreciation 300

Other expenses 3,000

Taxes (paid in Sep. and Dec.) 500

Payment for capital equipment in Oct. 1,000

Supplies purchases in a month must equal 70% of the projected gross sales for the following month. Supplies are paid for in the month after purchase.

The corporation must maintain an ending cash balance of $3,500 each month and meets a cash shortfall through a short-term loan. (Ignore interest for purposes of this exercise.) For simplicity in this exercise, assume that excess cash remains as cash (i.e., is not reinvested). Assume that at the beginning of July, the company had a cash balance of $3,500 with no short-term loan outstanding.

After referring to the information provided below, prepare a cash budget for the company for the period July to December 2018.