Reference no: EM131216040

The Balance Sheet of Company A on December 31 last year is shown below.

The company has received a large order and anticipates the need to go to the bank to increase its borrowings. As a result, it has to forecaset its cash requirements for January, February and March this year.

Typically, the company collects 20 per cent of its sales in the month of sale, 70 per cent in the subsequent month, and 10 per cent in the second month after the sale. All sales are credit sales.

Cash   50,000   Accounts Payable 360,000

Accounts Receivable 530,000 Notes Payable 400,000

Inventories 545,000   Accrued Expenses 212,000

Current Assets 1,125,000   Current Liabilities   972,000

Long-term Liabilities 450,000

Non-Current Assets 1,836,000 Total Liabilities   1,422,000

Common Stocks   100,000

Retained Earnings 1,439,000

Total Assets 2,961,000 Total Liabilities & Shareholders' Equity 2,961,000

Purchases of raw materials to manufacture the company's products are made in the month prior to the sale and amount to 60 per cent of sales in the subsequent month. Payments for said purchases occur in the month after the purchase. Labor costs, including overtime, are expected to be P150,000 in January, P200,000 in February, and P160,000 in March. Selling, administrative, and other cash expenses are expected to be P100,000 per month for January through March. Actual Sales in November and December last year and projected sales for January through April this year are as follows:

November   500,000   February 1,000,000

December 600,000   March 650,000

January   600,000 April 750,000

Required:

1. Prepare a cash budget for the months of January, February and March taking into consideration that the firm wants to maintain a cash balance of P50,000 at all times.

2. Prepare a projected Income Statement for the months of January, February and March.

3. Prepare a projected Balance Sheet as of March 31.