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Alex Gowell Corporation (AGC) is planning to request a line of credit from its bank and wants to estimate its cash needs for the month of September 2020. The following sales forecasts have been made for 2020:

August $400,000
September $300,000
October $300,000
November $200,000
December $200,000

Collection estimates were obtained from the credit collection department as follows:

• 20% collected within the month of sale; 68% collected the first month following the sale; 10% collected the second month following the sale and the remaining will be uncollectible.

• Total labour and raw material costs will be 50% of monthly sales and are typically settled in the month in which they are incurred.

• General administrative expenses are $40,000 and $44,000 for the months of October and November respectively.

• The corporation tax rate is 40%. Estimated tax liability are to be paid quarterly (i.e. March, June, September and December), though adequate provisions are to be made every month for taxes.

Prepare a cash budget for October and November 2020, assume the ending cash balance in September will be $16,000.


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