In-tech Corporation s sales and purchases for the last three months are as following:
Sales ($) Purchases ($)
October 100,000 80,000
November 90,000 100,000
December 120,000 75,000
For the next three months, it estimates sales and purchases to be as following:
Sales ($) Purchases ($)
January 90,000 70,000
February 80,000 70,000
March 80,000 70,000
It pays 40 percent of purchases in cash and gets a 4 percent discount. Another 40 percent of purchases are paid the next month, and the final 20 percent of purchases are paid in the second month after the purchase (for example, 40 percent of October purchases are paid in October, 40 percent October purchases are paid in November, and 20 percent October purchases are paid in December). Half of the sales are made in cash, and the balance is collected the next month. Cash sales are given a two percent discount, and five percent of credit sales end up as bad debt. The monthly operating expenses for In-tech Corporation s are $10,000. In-tech expects to sell one of its machinery in March for $25,000. It will buy the replacement in April for $50,000. The cash balance as on December 31 was $50,000. In-tech has a target cash balance of $50,000. Prepare a monthly cash budget for the next three months.