Question

Date: May 2, Year 7

To: Melissa Shaw, Accountant II

From: Robert Widerman, Accounting Manager

Re: Cash budgets and forecasts

Hi Melissa,

Please update the cash portion of the revised budget for May and June. The budget includes a cash collections forecast, a cash payments forecast, and an estimate of the cash balance for the balance sheet. These will also be used in the cash flow statement.

In the past, 70% of credit sales are collected in the month of sale, 20% the month after the sale, and 9% the second month following the sale. The remainder is usually not collected and is written off through the allowance for uncollectible accounts.

May and June purchases are forecasted to be $54,000 and $70,000, respectively. Payments are made at the time of purchase to obtain a 2% discount. We also expect other cash payments of $14,400 in May and $15,100 in June.

May and June sales are forecasted to be $66,000 and $72,000, respectively.

Thanks,

Robert

Babbit’s Rabbits

Bank Reconciliation

April Year 7

Bank balance per statement

$23,053.96

Difference

(1,053.96)

Bank balance per accounts (cashbook)

22,000.00

Reconciling items

(1,053.96)

Babbit’s Rabbits

Schedule of Sales and Purchases

January - April, Year 7

Month

Sales

Purchases

Jan.

  $72,000

  $42,000

Feb.

  $66,000

  $48,000

Mar.

  $60,000

  $36,000

Apr.

  $78,000

  $54,000

Total to Date

$276,000

$180,000

Complete Babbit's Rabbits' forecasted cash balances for the months of May and June. Enter the appropriate amounts in the associated cells. Enter cash inflows as positive numbers; enter cash outflows as negative numbers using a leading minus (-) sign.

	May	June
1. Beginning cash balance
2. Inflows
3. Outflows
4. Ending cash balance

Answer 1

	May	June
1. Beginning cash balance	$   22,000.00	$  21,880.00
2. Inflows	$   67,200.00	$  70,620.00
3. Outflows	$  (67,320.00)	$ (83,700.00)
4. Ending cash balance	$   21,880.00	$    8,800.00
Cash Inflows:
	January	February	March	April	May	June
January	$50,400	$14,400	$6,480
February		$46,200	$13,200	$5,940
March			$42,000	$12,000	$5,400
Apr				$54,600	$15,600	$7,020
May					$46,200	$13,200
June						$50,400
Total Cash Inflow	$50,400	$60,600	$61,680	$72,540	$67,200	$70,620
Cash outflows	May	June
Purchases Payment	$        52,920	$       68,600
Other Payment	$        14,400	$       15,100
Total outflows	$        67,320	$       83,700