John Wills, Bates & Hill Fabricators’ budget director, has received budget information from several managers and is preparing the company’s cash budget. In addition to the information he received from these managers, John knows the following:
- Bates & Hill plans to have $32,400 in its cash account on January 1.
- Bates & Hill plans to purchase and pay cash for a piece of land in January at a cost of $90,000.
- Bates & Hill plans to make a cash purchase of equipment in March at a cost of $30,000.
- Bates & Hill’s income taxes from last quarter totaling $26,400 will be paid in January.
- Bates & Hill is required to maintain a minimum cash balance of $50,000 in its account at First National Bank.
- Bates & Hill has negotiated with the First National Bank to provide a $175,000 line of credit that can be borrowed against in $1,000 increments on the first day of the month. Any repayments on the line of credit must also be made in $1,000 increments and are made on the last day of the month when cash is available. The annual interest rate on this line of credit is 6%. Any time a principal payment is made, all accrued interest to date is repaid.
Required
Prepare Bates & Hill’s cash budget for the first quarter.
