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Question 4: Rodie Company has budgeted sales revenues as follows: Particulars June July August Credit Sales...

Question 4: Rodie Company has budgeted sales revenues as follows:

Particulars June July August
Credit Sales $135,000 $145,000 $90,000
Cash Sales $90,000 $255,000 $195,000
Total Sales $225,000 $400,000 $285,000

Past experience indicates that 60% of the credit sales will be collected in the month of sale and the remaining 40% will be collected in the following month. Purchases of inventory are all on credit and 50% is paid in the month of purchase and 50% in the month following purchase. Budgeted inventory purchases are:

June $300,000
July $250,000
August $105,000

Other cash disbursements budgeted: (a) selling and administrative expenses of $48,000 each month, (b) dividends of $103,000 will be paid in July, and (c) purchase of equipment in August for $30,000 cash. The company wishes to maintain a minimum cash balance of $50,000 at the end of each month. The company borrows money from the bank at 8% interest if necessary to maintain the minimum cash balance. Borrowed money is repaid in months when there is an excess cash balance. The beginning cash balance on July 1 was $50,000. Assume that borrowed money in this case is for one month.

Instructions Prepare a cash budget for the months of July and August. Prepare separate schedules for expected collections from customers and expected payments for purchases of inventory.

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ekkarill92 answered 1 year ago
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