Cash budget and pro forma balance sheet inputs Jane McDonald, a financial analyst for Carroll Company, has prepared the following sales and cash disbursement estimates for the period February–June of the current year.
|
|
|
Cash |
|
Month |
Sales |
disbursements |
|
February |
$500 |
$400 |
|
March |
600 |
300 |
|
April |
400 |
600 |
|
May |
200 |
500 |
|
June |
200 |
200 |
Ms. McDonald notes that historically, 30% of sales have been for cash. Of credit sales, 70% are collected 1 month after the sale, and the remaining 30% are collected 2 months after the sale. The firm wishes to maintain a minimum ending balance in its cash account of $25. Balances above this amount would be invested in short term government securities (marketable securities), whereas any deficits would be financed through short term bank borrowing (notes payable). The beginning cash balance at April 1 is $115.
a. Prepare a cash budget for April, May, and June.
b. How much financing, if any, at a maximum would Carroll Company require to meet its obligations during this 3 month period?
c. A pro forma balance sheet dated at the end of June is to be prepared from the information presented. Give the size of each of the following: cash, notes payable, marketable securities, and accounts receivable.