Question

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Built-Tight is preparing its master budget for the quarter ended September 30, 2017. Budgeted sales and cash payments for product costs for the quarter follow:

	July			August			September
Budgeted sales	$	57,000		$	73,000		$	55,000
Budgeted cash payments for
Direct materials		15,760			13,040			13,360
Direct labor		3,640			2,960			3,040
Factory overhead		19,800			16,400			16,800

Sales are 20% cash and 80% on credit. All credit sales are collected in the month following the sale. The June 30 balance sheet includes balances of $15,000 in cash; $44,600 in accounts receivable; and a $4,600 balance in loans payable. A minimum cash balance of $15,000 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 consist of sales commissions (10% of sales), office salaries ($3,600 per month), and rent ($6,100 per month).

Prepare a cash receipts budget for July, August, and September.

BUILT-TIGHT Cash Receipts Budget For July, August, and September July August September Less: ending accounts receivable Cash receipts from: 0 0 0 Total cash receipts

Prepare a cash budget for each of the months of July, August, and September.

Answer 1

A) A cash receipts budget for July, August, and September is as follows:

  BUILT-TIGHT

  Cash Receipts Budget

For July, August and September   

	July($)	August ($)	September($)
Sales	57,000	73,000	55,000
Less: Ending Account Receivable (80%)	45,600	58,400	44,000
Cash Receipt:
Cash Sale (20%)	11,400	14,600	11,000
Collection of account receivable	44,600	45,600	58,400
Total Cash Receipt	$56,000	$60,200	$69,400

B)A cash budget for July, August, and September is as follows:

BUILT-TIGHT

Cash Budget

For July, August and September

	July ($)	August($)	September($)
Cash Balance at begining	15,000	15,000	22,522
Cash receipt	56,000	60,200	69,400
Total Cash Available	71,000	75,200	91,922
Cash Payment:
Direct materials	15,760	13,040	13,360
Direct labor	3,640	2,960	3,040
Factory overhead	19,800	16,400	16,800
Sales commissions (10% of sales)	5,700	7,300	5,500
office salaries ($3,600 per month)	3,600	3,600	3,600
Rent ($6,100 per month)	6,100	6,100	6,100
Interest (1%)	46	32	0
Total Cash Payment	54,646	49,432	48,400
Cash Surplus (Deficit)	16,354	25,768	43,522
Borrowing	0	0	0
Repayment	(1,354)	(3,246)	0
Ending Cash Balance	$15,000	$22,522	$ 43,522
Loan Balance :
Loan Balance at Begining	4,600	3,246	0
Borrowing	0	0	0
Repayment	(1,354)	(3,246)	0
Loan Balance at Ending	$3,246	$ 0	$ 0