Question

Cash

budget—Basic

  Grenoble Enterprises had sales of

$49,600 in March and

$60,200in April. Forecast sales for​ May, June, and July are

$69,800​,$80,200​,and

$ 99 comma 500$99,500​,

respectively. The firm has a cash balance of

$ 4 comma 500$4,500

on May 1 and wishes to maintain a minimum cash balance of

$ 4 comma 500$4,500.

Given the following​ data, prepare and interpret a cash budget for the months of​ May, June, and July.

​(1) The firm makes

22 %22%

of sales for​ cash,

61 %61%

are collected in the next​ month, and the remaining

17 %17%

are collected in the second month following sale.  

​(2) The firm receives other income of

$ 2 comma 500$2,500

per month.  

​(3) The​ firm's actual or expected​ purchases, all made for​ cash, are

$ 50 comma 400$50,400​,

$ 69 comma 500$69,500​,

and

$ 79 comma 600$79,600

for the months of May through​ July, respectively.  

​(4) Rent is

$ 3 comma 500$3,500

per month.  

​(5) Wages and salaries are

12 %12%

of the previous​ month's sales.  

​(6) Cash dividends of

$ 2 comma 600$2,600

will be paid in June.  

​(7) Payment of principal and interest of

$ 3 comma 800$3,800

is due in June.  

​(8) A cash purchase of equipment costing

$ 5 comma 700$5,700

is scheduled in July.  

​(9) Taxes of

$ 6 comma 500$6,500

are due in June.

Answer 1

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Cash Budget
		May	June	July	Total
Beginning Cash Balance		$    4,500	$ 15,676	$    4,100	$    4,500
Add: Collection from Customers
Against Cash Sale	22% of Sale	$ 15,356	$ 17,644	$ 21,890	$ 54,890
Next Month	61% of Sale	$ 42,578	$ 48,922	$ 60,695	$152,195
Next to Next Month	17% of Sale	$ 11,866	$ 13,634	$ 16,915	$ 42,415
Add: Other Income		$    2,500	$    2,500	$    2,500	$    7,500
Total Cash Available	A	$ 76,800	$ 98,376	$106,100	$261,500
Less: Cash Disbursment for:
Purchases		$ 50,400	$ 69,500	$ 79,600	$199,500
Rent Expense		$    3,500	$    3,500	$    3,500	$ 10,500
Wages and Salaries	12% of Previous sale	$    7,224	$    8,376	$    9,624	$ 25,224
Dividend Payment			$    2,600		$    2,600
Note and Interest Payment			$    3,800		$    3,800
Purchase of Equipment				$    5,700	$    5,700
Tax Payment			$    6,500		$    6,500
Total Cash Payment	B	$ 61,124	$ 94,276	$ 98,424	$253,824
Ending cash Balance	A-B	$ 15,676	$    4,100	$    7,676	$    7,676