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(Solution) - Security Services Company provides security monitoring services

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Security Services Company provides security monitoring services. It employs five security specialists. Each specialist works an average of 160 hours a month. The company?s controller has compiled the following information:



Sixty percent of the client billings are cash sales collected during the month of sale; 30 percent are collected in the first month following the sale; and 10 percent are collected in the second month following the sale. Operating supplies are paid for in the month of purchase. Selling and administrative expenses and service overhead are paid in the month following the cost?s incurrence.
The company has a bank loan of $12,000 at a 12 percent annual interest rate. Interest is paid monthly, and $2,000 of the loan principal is due on February 28. Income taxes of $4,500 for the last calendar year are due and payable on March 15. The five security specialists each earn $8.50 an hour, and all payroll-related employee benefit costs are included in service overhead. The company anticipates no capital expenditures for the first quarter of the coming year. It expects its cash balance on December 31 to be $13,000.

Required
Prepare a monthly cash budget for Security Services Company for the three month period ended March 31.

 







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This question was answered on: Jul 11, 2017

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