The Treasurer of Unisyms Company Has Accumulated the Following Budget

question 81

Essay

The treasurer of Unisyms Company has accumulated the following budget information for the first two months of the coming year:

The company expects to sell about 35% of its merchandise for cash.Of sales on account,80% are expected to be collected in full in the month of the sale and the remainder in the month following the sale.One-fourth of the manufacturing costs are expected to be paid in the month in which they are incurred and the other three-fourths in the following month.Depreciation,insurance,and property taxes represent $6,400 of the probable monthly selling and administrative expenses.Insurance is paid in February,and a $40,000 installment on income taxes is expected to be paid in April.Of the remainder of the selling and administrative expenses,one-half are expected to be paid in the month in which they are incurred,with the balance paid in the following month.Capital additions of $250,000 are expected to be paid in March.
Current assets as of March 1 are composed of cash of $45,000 and accounts receivable of $51,000.Current liabilities as of March 1 are composed of accounts payable of $121,500 ($102,000 for materials purchases and $19,500 for operating expenses).Management desires to maintain a minimum cash balance of $20,000.
Prepare a monthly cash budget for March and April.

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Definitions:

Majority Shareholder

An individual or entity owning more than 50% of a company's shares, giving them significant control over the company's decisions.

Close Corporation

A type of corporation characterized by a small number of shareholders, no public market for its shares, and often operated similarly to a partnership.

Transferability

The ability of an asset to be transferred or made over from one party to another.

Close Corporation

A privately held company characterized by a small number of shareholders with no public market for its shares.