Felasco Nurseries Inc_Cash Budget

Basic Cash Budget

P 3. Felasco Nurseries Inc. has been in business for six years and has four divisions. Ethan Poulis, the corporation’s controller, has been asked to prepare a cash budget for the Southern Division for the first quarter. Projected data supporting this budget follow.

Sales (60% on credit) Purchases

November$160,000December$ 86,800

Collection records of accounts receivable have shown that 30 percent of all credit sales are collected in the month of sale, 60 percent in the month following the sale, and 8 percent in the second month following the sale; 2 percent of the sales are uncollectible. All purchases are paid for in the month after the purchase. Sala­ries and wages are projected to be $25,200 in January, $33,200 in February, and $21,200 in March. Estimated monthly costs are utilities, $4,220; collection fees, $1,700; rent, $5,300; equipment depreciation, $5,440; supplies, $2,480; small tools, $3,140; and miscellaneous, $1,900.

Each of the corporation’s divisions maintains a $6,000 minimum cash bal­ance. As of December 31, the Southern Division had a cash balance of $9,600.


1. Prepare a monthly cash budget for Felasco Nurseries’ Southern Divisiontor the first quarter.

2. Should Felasco Nurseries anticipate taking out a loan for the Southern Divi­sion during the quarter? If so, how much should it borrow, and when?