Question

Todd Enterprises is preparing a cash budget for the second quarter of the coming year. The following data have been forecasted:

	April		May
Sales …………………………………………………………	$150,000		$157,500
Merchandise purchases ……………………………	107,000		112,400
Operating expenses:
Payroll …………………………………………………	13,600		14,280
Advertising …………………………………………..	5,400		5,700
Rent ……………………………………………………..	2,500		2,500
Depreciation …………………………………………	7,500		7,500
End of April balances:
Cash ………………………………………………………	30,000
Bank loan payable …………………………………	26,000

Additional data:

(1) Sales are 40% cash and 60% credit. The collection pattern for credit sales is 50% in the month following the sale and 50% in the month thereafter. Total sales in March were $125,000.

(2) Purchases are all on credit, with 40% paid in the month of purchase and 60% paid in the following month.

(3) Operating expenses are paid in the month they are incurred.

(4) A minimum cash balance of $25,000 is required at the end of each month.

(5) Loans are used to maintain the minimum cash balance. At the end of each month, interest of 1% per month is paid on the outstanding loan balance as of the beginning of the month. Repayments are made at the end of the month if the cash balance exceeds $25,000.

Prepare the company's cash budget for May. Show the ending loan balance at May 31. Show all calculations.

Answer 1

Todd Enterprises
Cash Budget
	May
Beginning Balance (1)	$           30,000
Add:Cash Receipts (2)
Expected collections from customer (w.n)A	$        145,500
Total Cash Available (3)=1+2	$      175,500
Less: Disbursements:
Cash payments for Purchases(w.n.)B	-$        109,160
Payroll	-$          14,280
Advertising	-$             5,700
Rent	-$             2,500
Interest on Loan (1% on $26,000)	-$                260
Total Cash Disbursements (4)	-$      131,900
Excess/Deficiency of cash (5)=3-4	$         43,600
Financing:
Borrowing from bank (BALANCE)	$         18,600
Cash Balance, Ending-[Minimum]	$         25,000
Loan Balance, [$26,000-$18,600]	$            7,400
*Available balance= $25,000
*Balance required for minimum balance,= $25,000
*Bank loan repayable = [$43,600-$25,000]=$18,600
*Ending cash balance= $25,000

	Workings:
A	Total Receivables
	Particulars	March	April	May
	Total Sales	$ 125,000	$ 150,000	$ 157,500
	Cash Sales-40%	$     50,000	$     60,000	$     63,000
	Credit Sales - 60%	$     75,000	$     90,000	$     94,500
	50% in the month following of sale		$       37,500	$       45,000
	50% in the Next Following Month			$       37,500
	Total Receivable	$                -	$     37,500	$     82,500
	Cash sales	$     50,000	$     60,000	$     63,000
	Total cash collection from customer	$     50,000	$     97,500	$ 145,500
B	Total Credit purchase
	Particulars	March	April	May
	Credit purchase (100%)		$ 107,000	$ 112,400
	40%Paid in the month of purchase	$                -	$       42,800	$       44,960
	60% in the Following Month		$                -	$       64,200
	Total Cash Payable to Creditors	$                -	$     42,800	$ 109,160

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