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Horngren'S Financial And Managerial Accounting
Found in: Page 1235

Short Answer

Preparing the financial budget—cash budget

Use the original schedule of cash receipts completed in Exercise E22-26, Requirement 1, and the schedule of cash payments completed in Exercise E22-27 to complete a cash budget for Marcel Company for January, February, and March.

Additional information: Marcel’s beginning cash balance is $5,000, and Marcel desires to maintain a minimum ending cash balance of $5,000. Marcel borrows cash as needed at the beginning of each month in increments of $1,000 and repays the amounts borrowed in increments of $1,000 at the beginning of months when excess cash is available. The interest rate on amounts borrowed is 8% per year. Interest is paid at the beginning of the month on the outstanding balance from the previous month.


The balances in prepaid property taxes, accounts payable, and utilities payable are $3,330, $4,800, $900.

See the step by step solution

Step by Step Solution

Step 1: Preparation of cash budget





Beginning cash balance




Cash receipts




Cash payments:

Direct materials




Direct labor cost




Utilities for plant




Property taxes on plant

$200*12 =$2,400



Utilities for office




Property taxes on office

$170*12 =$2,040



Office salaries




Total cash payments




Ending cash balance before financing




Minimum cash balance desired




Projected cash excess (deficiency)




Financing (borrowing)




Ending cash balance




Step 2: Calculation of balances in prepaid property taxes, accounts payable, and utilities payable.

Prepaid property taxes = (tax on office+ tax on plant)*9

= ($200+$170)*9

= $3,330

Accounts payable = $ 4,800

Utilities payable = Utilities on office+ utilities on plant

= $650 + $250

= $900

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