James International Is in the Construction Business

question 62

Essay

James International is in the construction business. In 2010, it is expected that 30 percent of a month's sales will be received in cash, with the balance being received the following month. Of the purchases, 50 percent are paid the following month, 40 percent are paid in two months, and the remaining 10 percent are paid during the month of purchase.
The sales force receives $1,500 a month base pay plus a 4 percent commission. Labor expenses are expected to be $4,000 a month. Other operating expenses are expected to run about $4,500 a month, including $500 for depreciation. The ending cash balance for 2009 was $18,000.

a. Prepare a cash budget and determine the projected ending cash balances for the first three months of 2010.
b. Determine the months that the company would either borrow or invest cash.

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Definitions:

Intimacy

The sense of close personal connection and mutual vulnerability shared between individuals, often in the context of a close relationship.

Levinson

Refers to the theories of psychologist Daniel Levinson, who proposed a series of stages of adult development, including the concept of a mid-life crisis.

Settling Down

The act of beginning to live a stable and orderly life, commonly associated with establishing a long-term residence, career, or entering into long-term relationships.

Developmental Sequence

The ordered progression of behavioral, cognitive, or physical changes that occur as a person grows and matures.