Question

Holcomb Company expects to have a cash balance of $43,000 onJanuary 1, 2014. These are the relevant monthly budget data for thefirst two months of 2014.

1. Collections from customers: January $85,000, February$132,000

2. Payments to suppliers: January $40,000, February $50,000

3. Wages: January $34,000, February $40,000. Wages are paid inthe month they are incurred.

4. Administrative expenses: January $24,000, February $31,000.These costs include depreciation of $1,000 per month. All othercosts are paid as incurred.

5. Selling expenses: January $15,000, February $20,000. Thesecosts are exclusive of depreciation. They are paid as incurred.

6. Sales of short-term investments in January are expected torealize $12,000 in cash. Holcomb has a line of credit at a localbank that enables it to borrow up to $40,000. The company wants tomaintain a minimum monthly cash balance of $25,000. InstructionsPrepare a cash budget for January and February