Question

Lamia's House of Software (LHS) wants to prepare a cash budget for months of

September through Dêcember. Using the following information,

Sales were $50,000 in June and $60,000 in July. Sales have been

forecasted to be $65,000, $72,000, $63,000, $59,000, and $56,000 for months

of August, September, October, November, and December, respectively. In the

past, 10 percent of sales were on cash basis, and the collection were 50

percent in the first month, 30 percent in the second month, and 10 percent in

the third month following the sales.

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Every four months (three times a year) $500 of dividends from investments

are expected. The first dividend payment was received in January.

Purchases are 60 percent of sales, 15 percent of which are paid in cash, 65

percent are paid one month later, and the rest is paid two months after

purchase.

$8,000 dividends are paid twice a year (in March and September).

The monthly rent is $2,000.

Taxes are $6,500 payable in December.

A new machine will be purchased in October for $2,300

$1,500 interest will be paid in November

$1,000 loan payments are paid every month.

Wages and salaries are $1,000 plus 5 percent of sales in each month.

August's ending cash balance is $3,000.

LHS would like to maintain a minimum cash balance of $10,000.

October Cash.

$1,570 ExcessCash

November Cash

$36,900 Excess cash

September cash

$1,570 Required Financing

Answer 1