Exercise P3-13
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ScribdTranslationsExercise P3-13
Uploaded by
ScribdTranslationsFinancial Administration Study Guide
Luis Rodriguez Fuentes
AE3–2 Cash Budget and Pro Forma Balance Sheet Items Jane McDonald, a financial analyst at
Carroll Company, prepared the following estimates of sales and cash disbursements for the period
February-June of the current year.
McDonald notes that, on record, 30 percent of sales have been in cash. Of credit sales , 70 percent
is collected 1 month after the sale and the remaining 30 percent is collected 2 months after the
sale. The company wants 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), while any shortfall would be financed through short-term bank loans (notes payable).
The beginning cash balance on April 1 is $115.
a . Prepare a cash budget for April, May and June.
b . How much financing, if any, would Carroll Company require at most to meet its obligations
during this 3-month period?
c . A pro forma balance sheet dated the end of June will be prepared using the information
presented. Provide the size of each of the following accounts: cash, notes payable, marketable
securities, and accounts receivable.
to.
Caroll Company Cash Budget April-June
February March April May June
Forecasted sales $500 $600 $400 $200 $200
Cash Sales $150 $180 $120 $60 $60
Collections accounts receivable
After 1 month $294 $196 $98
after 2 months $105 $126 $84
Total cash receipts $519 $382 $242
(-) Total disbursements $400 $300 $600 $500 $200
Net cash flow $81 $118 $42
(+) Initial cash $115 $34 $84
Final cash $34 $84 $42
(-) Minimum cash balance $25 $25 $25
Total financing required $109 $67
Surplus Cash Balance $9
b.
2nd Partial
Financial Administration Study Guide
Luis Rodriguez Fuentes
Caroll Company would require a maximum financing of $109 during the 3-month period.
c.
Cash $25
Obtained from Minimum Cash Balance: June
Documents payable $67
Obtained Total Funding Required: June
Negotiable Securities $0
Obtained from Surplus Cash Balance: June
Accounts payable $182
200*0.49= $98 $140+$42=$182
July
$98+$42= $140
2nd Partial
