Question

Monthly Cash Budget
Sutter, Inc. is a wholesaler for its only product, deluxe wireless rechargeable electric shavers, which sell for $70 each and cost Sutter $48 each. On June 1, 2016, Sutter’s management requested a cash budget for June. The following selected account balances at May 31, 2016, were gathered by the accounting department:

Cash				$56,000
Marketable securities (at cost)				160,000
Accounts receivable (all trade)				2,170,000
Inventories (12,000 units)				576,000
Operating expenses payable				196,800
Accounts payable (all merchandise)				902,400
Note payable (due 12/31/2016)				600,000

Actual sales for April and May were 30,000 and 50,000 units, respectively. Projected unit sales for June and July are 40,000 and 20,000, respectively. Experience indicates that 50% of sales should be collected in the month of sale, 30% in the month following sale, and the balance in the second month following sale. Uncollectible accounts, returns, and allowances are negligible.

Planned purchases should provide ending inventories equal to 30% of next month’s unit sales volume. Approximately 60% of the purchases are paid for in the month of purchase and the balance in the following month.

Monthly operating expenses are budgeted at $9.60 per unit sold plus a fixed amount of $288,000 including depreciation of $112,000. Except for depreciation, 70% of operating expenses are paid in the month incurred and the balance in the following month. Interest expense is included in operating expenses.

Special anticipated June transactions include the following:
1. Declaration of a $60,000 cash dividend to be paid 2 weeks after the June 20 date of record.
2. Sale of all but $40,000 of the marketable securities held on May 31; a gain of $18,000 is anticipated.
3. Payment of $50,000 installment on the note payable.
4. Trade-in of an old company plane originally costing $300,000 and now having accumulated depreciation of $200,000 at a gain of $160,000 on a new plane costing $2,000,000. Sufficient cash will be paid at the time of trade-in so that only 50% of the total price will have to be financed.
5. Sutter’s treasurer has a policy of maintaining a minimum month-end cash balance of $40,000 and has a standing arrangement with the bank to borrow any amount up to a limit of $400,000.

Prepare a cash budget for Sutter, Inc., for June 2016.

Collections in June from customers:

From April sales	$Answer
From May sales	Answer
From June sales	Answer
Total collections	$Answer

Payments on account for merchandise purchases:

	May	June
Unit Sales	Answer	Answer
Ending inventories	Answer	Answer
Total units to be available	Answer	Answer
Beginning inventories	Answer	Answer
Units to be purchased	Answer	Answer
Total dollar purchases	$Answer	$Answer
Portion paid in June	$Answer	$Answer

Payment of operating expenses:

	May	June
Total variable operating expenses	$Answer	$Answer
Fixed operating expenses	Answer	Answer
Total operating expenses	Answer	Answer
Monthly depreciation	Answer	Answer
Operating expenses requiring payment	$Answer	$Answer
Amounts to be paid in June	$Answer	$Answer

Cash required at time of plane purchase:

Cost of new plane		$Answer
Book value of old plane	$Answer
Gain on trade-in	Answer
Total trade-in allowance		Answer
Balance owing at trade-in		Answer
Portion to be financed		Answer
Cash payment required		Answer

Sutter, Inc. Cash Budget For the Month Ended June 30, 2016
Beginning cash balance	$Answer
Cash receipts:
Collections from customers (calculated above)	Answer
AnswerPayment on dividends declaredPayment on note payableSale on securities	Answer
Short-term borrowing	Answer
Cash available	Answer
Cash disbursements:
Payments on accounts payable (calculated above)	Answer
Payments of operating expenses payable (calculated above)	Answer
Down payment on computer (calculated above)	Answer
AnswerPayment on dividends declaredPayment on note payableSale on securities	Answer
Total cash disbursements	Answer
Ending cash balance	$Answer

Answer 1