(Appendix 10A)RLN Corporation Is Preparing Its Cash Budget for the Next

Essay

(Appendix 10A)RLN Corporation is preparing its cash budget for the next fiscal quarter. Several pieces of data which may be useful for that task are shown below.
Beginning cash balance $ 6,000
Amortization 8,000
Support department costs 12,000
Plant asset purchases 17,000
Wages expense (direct labour)19,000
Cash paid to direct labour employees 22,000
Inventory purchases 25,000
Payments to inventory suppliers 40,000
Sales revenue 80,000
Cash collected from customers 95,000
Support department costs do not include amortization. The company plans to purchase the plant asset at the end of the year, making a 30% down payment and financing the remainder with a 6%, 180-day note payable. RLN wishes to maintain an ending cash balance of $7,200; any excess cash is invested in short-term securities. A zero rate of return is budgeted for short-term securities. Cash deficiencies are made up through short-term borrowing (30%)and capital stock issuances (70%).
a)Use the relevant data to prepare RLN's cash budget.
b)Explain why the managers of RLN Corporation cannot be certain that achieving the cash budget results calculated in part (a).