In: Accounting
Castor, Inc., is preparing its master budget for the quarter
ended June 30. Budgeted sales and cash payments for merchandise for
the next three months follow:
Budgeted | April | May | June | ||||||
Sales | $ | 30,800 | $ | 41,200 | $ | 25,200 | |||
Cash payments for merchandise | 22,600 | 15,600 | 16,000 | ||||||
Sales are 75% cash and 25% on credit. All credit sales are
collected in the month following the sale. The March 31 balance
sheet includes balances of $13,200 in cash, $13,200 in accounts
receivable, $12,200 in accounts payable, and a $3,200 balance in
loans payable. A minimum cash balance of $13,200 is required. Loans
are obtained at the end of any month when a cash shortage occurs.
Interest is 1% per month based on the beginning-of-the-month loan
balance and is paid at each month-end. If an excess balance of cash
exists, loans are repaid at the end of the month. Operating
expenses are paid in the month incurred and include sales
commissions (10% of sales), shipping (3% of sales), office salaries
($6,200 per month), and rent ($4,200 per month).
Prepare a cash budget for each of the months of April, May, and
June. (Negative balances and Loan repayment amounts (if
any) should be indicated with minus sign. Round your final answers
to the nearest whole dollar.)
Required:
April | May | June | |
Beginning cash balance | $13,200 | $13,200 | $16,469 |
Cash sales | $23,100 (30,800*75%) | $30,900 (41,200*75%) | $18,900 (25,200*75%) |
Collection on account | $13,200 | $7,700 (30,800 * 25%) | $10,300 (41,200 * 25%) |
Total cash available (A) | $49,500 | $51,800 | $45,669 |
Cash disbursement: | |||
Merchandise | $22,600 | $15,600 | $16,000 |
Interest on bank loan | $32 (3,200*1%) | $39 (3,936 * 1%) | $0 |
Sales commission (10% of sales) | $3,080 | $4,120 | $2,520 |
Shipping (3% of sales) | $924 | $1,236 | $756 |
Office salaries | $6,200 | $6,200 | $6,200 |
Rent | $4,200 | $4,200 | $4,200 |
Total cash payment (B) | $37,036 | $31,395 | $29,676 |
Preliminary cash balance (A - B) | $12,464 | $20,405 | $15,993 |
Additional loan (Loan repayment) | $736 | ($3,936) | $0 |
Ending cash balance | $13,200 | $16,469 | $15,993 |
Loan balance | |||
April | May | June | |
Loan balance - Beginning of month | $3,200 | $3,936 | $0 |
Additional loan (Loan repayment) | $736 | ($3,936) | $0 |
Loan balance - End of month | $3,936 | $0 | $0 |