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These
are the relevant monthly budget data for the first two months of 2012.
1. Collections from customers: January $71,000, February $146,000
2. Payments to suppliers: January $40,000, February $75,000
3. Wages: January $30,000, February $40,000. Wages are paid in the month they are
incurred.
4. Administrative expenses: January $21,000, February $24,000. These costs include
depreciation of $1,000 per month. All other costs are paid as incurred.
5. Selling expenses: January $15,000, February $20,000. These costs are exclusive of
depreciation. They are paid as incurred.
6. Sales of short-term investments in January are expected to realize $12,000 in cash.
Merrick 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 $20,000.
Instructions
Prepare a cash budget for January and February.
SOLUTION
MERRICK COMPANY
Cash Budget
For the Two Months Ending February 28, 2012
January February