University:
Grand Rapids Community College
Course:
Financial and Managerial Accounting: Information for Decisions - John J. Wild
Academic year:

2024
Views:

133

Pages:

2
Author:

stud_ice13

To prepare a cash budget for Garcia Company for the month ended January 31, follow the cash budgeting steps: Step-by-step Cash Budget Preparation 1. Beginning Cash Balance: Garcia’s starting cash balance is $30,000. 2. Add Cash Receipts: Cash receipts from sales in January amount to $132,000. 3. Subtract Cash Payments: o Cash payments for direct materials: $63,500 o Cash payments for direct labor: $33,400 o Cash paid for overhead: $8,180 o Cash repayment of loan: $2,000 o Cash paid for interest on loan: $20 4. Determine Preliminary Cash Balance: This is the cash left after receipts and payments have been accounted for. 5. Compare to Minimum Required Balance: Garcia Company requires a minimum cash balance of $30,000 at the end of the month. If the preliminary cash balance is higher than this minimum, any excess is used to repay loans. If it is lower, additional loans may be required. Cash Budget for Garcia Company - January Particulars Amount Beginning Cash Balance (Jan 1) $30,000 Add: Cash Receipts from Sales $132,000 $162,000 Total Cash Available Less: Cash Payments Cash Payments for Direct Materials $63,500 Cash Payments for Direct Labor $33,400 a $8,180 Cash Repayment of Loan $2,000 Cash Paid for Interest on Loan $20 Total Cash Payments $107,100 Preliminary Cash Balance $54,900 Less: Minimum Cash Balance $30,000 Excess Cash $24,900 Final Cash Balance (Jan 31) $30,000 Conclusion: At the end of January, Garcia Company’s final cash balance remains $30,000, which satisfies the company’s minimum cash balance requirement. The excess $24,900 can be used for future loan repayments or investments. The loan was fully repaid during January. This cash budget helps ensure that Garcia Company manages its cash flows efficiently while maintaining the required liquidity.