Using the information provided, construct a monthly cash budget for October through December 2014. Based on your analysis, will Noble enjoy a surfeit of cash, or require external financing? Sales (20 percent for cash, the rest on 30-day credit terms):
2014 Actual 2014 Projected
July August September October November
76,000 88,000 266,000 125,000 51,000
Purchases (all on 60-day terms):
2014 Actual 2014 Projected
July August September October November
116,000 122,000 257,000 62,000 27,000
Salaries payable monthly 20,000
Principal payment on debt due in December 25,700
Interest due in December 9,000
Dividend payable in December 15,000
Taxes payable in November 19,000
Addition to accumulated depreciation in December4,000
Cash balance on October 1, 2014 34,000
Minimum desired cash balance 15,000

Noble

Monthly Cash Budget for the months of October through December 2014:

                                                           October     November      December

Cash balance on October 1, 2014   $34,000      $129,800      ($56,000)

Total cash received                          237,800        110,200          40,800

Total cash available                        $271,800    $240,000       ($15,200)

Cash payments:  

Cash payment for purchases          122,000      257,000          62,000

Salaries                                              20,000        20,000           20,000

Principal payment                                                                         25,700

Interest                                                                                            9,000

Dividend                                                                                        15,000

Taxes                                                                      19,000

Total cash payments                    $142,000    $296,000        $131,700

Cash Balance                               $129,800      ($56,000)    ($146,900)

Minimum desired cash balance 15,000

Explanation:

a) Data and Calculations:

1. Sales:

Cash Sales = 20% of Sales

Sales on account = 80%

Credit terms = n/30

                                  2014 Actual                            2014 Projected

                           July       August  September  October   November   Dec.

Sales:              76,000   88,000    266,000       125,000     51,000

Cash Sales                                       53,200        25,000     10,200

Cash received on account                                 212,800   100,000   40,800

Total cash received                                         $237,800  $110,200 $40,800

2. Purchases (all on 60-day terms):

                           2014 Actual                            2014 Projected

                         July      August   September   October   November   Dec.

Purchases      116,000  122,000   257,000      62,000      27,000

Cash payment                                116,000     122,000    257,000   62,000

3. Other information:

Salaries payable monthly 20,000

Principal payment on debt due in December 25,700

Interest due in December 9,000

Dividend payable in December 15,000

Taxes payable in November 19,000

Addition to accumulated depreciation in December 4,000

Cash balance on October 1, 2014 34,000

Minimum desired cash balance 15,000

b) Noble will enjoy cash surfeit in October only.  In November and December, it will be in some serious deficits that require external financing to keep the business afloat.  If cash requirement through some external financing is not satisfied in November and December, Noble will not be able to meet with its maturing debt obligations.

c

explanation: