Question

Pharoah Company expects to have a cash balance of $101,200 on January 1, 2022. These are the relevant monthly budget data for the first two months of 2022. 1. Collections from customers: January $156,200, February $321,200. 2. Payments to suppliers: January $88,000, February $165,000. 3. Wages: January $66,000, February $88,000. Wages are paid in the month they are incurred. 4. Administrative expenses: January $46,200, February $52,800. These costs include depreciation of $2,200 per month. All other costs are paid as incurred. 5. Selling expenses: January $33,000, February $44,000. These costs are exclusive of depreciation. They are paid as incurred. 6. Sales of short-term investments in January are expected to realize $26,400 in cash. Pharoah Company has a line of credit at a local bank that enables it to borrow up to $55,000. The company wants to maintain a minimum monthly cash balance of $44,000. Prepare a cash budget for January and February. (List items that increase cash balance first.) PHAROAH COMPANY Cash Budget January February

Answer 1

Solution

PHAROAH COMPANY
Cash Budget
For the Two months ended February 28, 2022
	January	February
Beginning Cash Balance	$     101,200.00	$    52,800.00
Add: Cash receipts
Collection from customers	$     156,200.00	$ 321,200.00
Cash from sale of investment	$        26,400.00
Total cash receipts	$     182,600.00	$ 321,200.00
Cash Available	$     283,800.00	$ 374,000.00
Less: Cash Payments
Payment to supplier	$        88,000.00	$ 165,000.00
Payment for wages	$        66,000.00	$    88,000.00
Payment for administrative expenses	$        44,000.00	$    50,600.00
Payment for Selling expenses	$        33,000.00	$    44,000.00
Total Cash Payments	$     231,000.00	$ 347,600.00
Ending Cash Balance Before Financing	$        52,800.00	$    26,400.00
Financing
Borrowing		$    17,600.00
Repayments
Ending Cash Balance	$        52,800.00	$    44,000.00