Sandhill Company expects to have a cash balance of $61,550 on January 1, 2017. These are the relevant monthly budget data for the first two months of 2017. 1. Collections from customers: January $86,550, February $161,550.
2. Payments to suppliers: January $55,550, February $90,550.
3. Wages: January $31,490, February $41,490. Wages are paid in the month they are incurred.
4. Administrative expenses: January $22,490, February $25,490. These costs include depreciation of $1,000 per month. All other costs are paid as incurred.
5. Selling expenses: January $16,490, February $21,490. These costs are exclusive of depreciation. They are paid as incurred.
6. Sales of short-term investments in January are expected to realize $13,490 in cash. Sandhill Company has a line of credit at a local bank that enables it to borrow up to $25,000. The company wants to maintain a minimum monthly cash balance of $35,550.

Required:
Prepare a cash budget for January and February.

                                                                            January                  February

Beginning Cash Balance                                      61,550                  36,570

Add: Receipts

Collections from Customers                               86,550                 161,550

Sale of Marketable Securities                             13,490                      0      

Total Receipts                                                    100,040                  161,550

Total Available Cash                                           161,590                  198,120

Less: Disbursements

Payments to Suppliers                                       55,550                      90,550

Wages                                                                 31,490                       41,490

Admin Expenses                                                21,490                       24,490

Selling  Expenses                                              16,490                       21,490

Total Disbursements                                       125,020‬                     178,020‬

Cash Balance                                                     ‭36,570‬                       ‭20,100‬

Financing

Add: Borrowings                                                   0                              15,450

Less: Repayments                                                0                                    0    

Ending Cash Balance                                        36,570                       35,550

Admin Expenses are independent of Depreciation which is not a cash expense.

The company wants to maintain a minimum monthly cash balance of $35,550 so in February they will have to borrow;

= 35,550 - 20,100  

= $15,450

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