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Q28E

Expert-verified
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.

Answer

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

Particulars

January

February

March

Beginning cash balance

$5,000

$5,380

$5,010

Cash receipts

$8,960

$12,080

$11,340

Cash payments:

Direct materials

$0

$3,100

$3,500

Direct labor cost

$3,300

$3,500

$3,600

Utilities for plant

$0

$650

$650

Property taxes on plant

$200*12 =$2,400

-

-

Utilities for office

$0

$250

$250

Property taxes on office

$170*12 =$2,040

-

-

Office salaries

$3,500

$3,500

$3,500

Total cash payments

$14,340

$14,500

$16,300

Ending cash balance before financing

(380)

$2,960

$50

Minimum cash balance desired

($5,000)

($5,000)

($5,000)

Projected cash excess (deficiency)

($5,380)

($2,960)

($4,950)

Financing (borrowing)

$5,380

$2,050

$4,950

Ending cash balance

$5,380

$5,010

$5,000

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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