P7-6A - Langerhan Inc. – Cash Budget

Cash

$ 11,984

Accounts receivable

20,225

Inventory

37,161

Property, plant, and equipment, net of depreciation

124,891

Accounts payable

23,057

Common stock

153,313

Retained earnings

11,653

1.

Gross profit is 26% of sales.

2.

Actual and budgeted sales data:

March (actual)

$48,196

April (budgeted)

71,727

3. 

Cash collections expected in April are:

March

$19,278

(40% of $48,196)

April

43,036

(60% of $71,727)

$62,314

4. 

Half of a month’s purchases are paid for in the month of purchase and half in the following month. Cash disbursements expected in April are:

Purchases March

$23,057

Purchases April

28,725

$51,782

5. 

Cash operating costs are anticipated to be $12,457 for the month of April.

6. 

Equipment costing $2,608 will be purchased for cash in April.

7. 

The company wishes to maintain a minimum cash balance of $12,626. An open line of credit is available at the bank. All borrowing is done at the beginning of the month, and all repayments are made at the end of the month. The interest rate is 13% per year, and interest expense is accrued at the end of the month and paid in the following month.