DEVRY ACCT 504 Week 3 Case Study 1 Flower Landscaping Corporation DEVRY ACCT 504 Week 6 Case Study 3 - Cash Budgetin | Page 2

Other budgeted cash receipts: (a) sale of plant assets for $33,000 in May, and (b) sale
of new common stock for $50,000 in June. Other budgeted cash disbursements: (a)
operating expenses of $15,000 each month, (b) selling and administrative expenses
of $10,150 each month, (c) purchase of equipment for $19,000 cash in June, and (d)
dividends of $20,000 will be paid in June.
The company has a cash balance of $20,000 at the beginning of May and wishes to
maintain a minimum cash balance of $20,000 at the end of each month. An open line
of credit is available at the bank and carries an annual interest rate of 10%. Assume
that all borrowing is done on the first day of the month in which financing is needed
and that all repayments are made on the last day of the month in which excess cash is
available. Also assume that there is no outstanding financing as of May 1.
Requirements:
1. Use this information to prepare a Cash Budget for the months of May and June,
using the template provided in Doc Sharing.
2. What are the three sections of a Cash Budget, and what is included in each section?
3. Why is a Cash Budget so vital to a company?
4. What are the five basic principles of cash management that a company can follow
in order to improve its chances of having adequate cash?