Cullumber Company expects to have a cash balance of $87,400 on January 1, 2022. These are the relevant monthly budget data for the first two months of 2022. 1. Collections from customers: January $134,900, February $277,400. 2. Payments to suppliers: January $76,000, February $142,500. 3. Wages: January $57,000, February $76,000. Wages are paid in the month they are incurred. 4. Administrative expenses: January $39,900, February $45,600. These costs include depreciation of $1,900 per month. All other costs are paid as incurred. 5. Selling expenses: January $28,500, February $38,000. These costs are exclusive of depreciation. They are paid as incurred. 6. Sales of short-term investments in January are expected to realize $22,800 in cash. Cullumber Company has a line of credit at a local bank that enables it to borrow up to $47,500. The company wants to maintain a minimum monthly cash balance of $38,000. Prepare a cash budget for January and February.

The preparation is shown below

Explanation:

The preparation of the cash budget for January and February is presented below

Particulars                        January          February

Beginning cash balance$87,400         $45,600

Add: Cash receipts  

Collection from customers  $134,900       $277,400

Sale of short term investments $22,800     $0

Total receipts                              $157,700    $277,400

Total available cash (A)      $245,100    $323,000

Less: Cash disbursements:  

Payment to suppliers             -$76,000     -$142,500  

Wages                                     -$57,000     -$76,000

Administrative expenses           -$38,000      -$43,700

Selling expenses                      -$28,500       -$38,000

Total cash disbursements (B)   -$199,500     -$300,200

Excess (Deficiency) of available

cash over disbursements (A-B) $45,600       $22,800

Financing:  

Borrowings                                                           $15,200

Repayments

Ending cash balance               $45,600        $38,000

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