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Prepare a cash budget for the quarter ending December

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Reference no: EM132748949

Question - Golden State Company has applied at a local bank for a short-term loan of $150,000 starting on October 1, 2019. The bank's loan officer has requested a cash budget from the company for the quarter ending December 31, 2019. The following information is needed to prepare the cash budget:

Sales: $600,000

Purchases: 350,000

Salaries and wages to be paid: 125,000

Rent payments: 7,000

Supplies (payments for): 4,500

Insurance payments: 1,500

Other cash payments: 22,000

A cash balance of $24,000 is planned for October 1 (beginning of quarter). Accounts receivable are expected to be $48,000 on October 1. All of these accounts will be collected in the quarter ending December 31. In general, Sales are collected as follows: 90% in the quarter of the sale and 10% in the quarter after the sale.

Accounts Payable are planned to be $480,000 at October 1 and will be paid during the quarter ended December 31. All purchases are paid for in the quarter after the purchase.

Required -

a. Prepare a cash budget for the quarter ending December 31, 2019. Assume that the $150,000 loan will be made on October 1 and will be repaid with interest at 10% on December 31.

b. If the company desires a minimum cash balance of $18,000, will the company be able to repay the loan as planned on December 31?

Reference no: EM132748949

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