Question

The accountant for Jean’s Dress Shop prepared the following cash budget. Jean’s desires to maintain a cash cushion of $10,000 at the end of each month. Funds are assumed to be borrowed and repaid on the last day of each month. Interest is charged at the rate of 1 percent per month.

Required

Complete the cash budget by filling in the missing amounts.

Determine the amount of net cash flows from operating activities Jean’s will report on the third quarter pro forma statement of cash flows.

Determine the amount of net cash flows from financing activities Jean’s will report on the third quarter pro forma statement of cash flows.

Complete this question by entering your answers in the tabs below.

Req A

Req B and C

Complete the cash budget by filling in the missing amounts. (Any shortages or repayments should be indicated with a minus sign. Round your answers to the nearest whole dollar amount.)

Cash Budget July August September Section 1: Cash receipts Beginning cash balance $25,000 Add cash receipts 90,000 100,000 120,300 Total cash available 115,000 Section 2: Cash payments For inventory purchases 82,750 70,115 87,076 For S&A expenses 27,250 30,280 30,716 For interest expense 0 Total budgeted disbursements 110,000 Section 3: Financing activities Surplus (shortage) 5,000 Borrowing (repayments) 5,000 Ending cash balance $10,000 $10,000 $10,000

Req A

Req B and C

Answer 1

Solution A:

Erica's Dress shop
Cash Budget
	July	August	September
Section 1 Cash Receipts:
Beginning Cash Balance	$25,000	$10,000	$10,000
Add: Cash receipts	$90,000	$1,00,000	$1,20,300
Total cash available	$1,15,000	$1,10,000	$1,30,300
Section 2: Cash Payments:
For Inventory Purchases	$82,750	$70,115	$87,076
For S&A Expenses	$27,250	$30,280	$30,716
For Interest Expense	$0	$50	$54
Total Budgeted Disbursements	$1,10,000	$1,00,445	$1,17,846
Section 3: Financing Activities:
Surplus (Shortages)	$5,000	$9,555	$12,454
Borrowings (repayments)	$5,000	$445	-$2,454
Ending cash balance	$10,000	$10,000	$10,000

Solution B:

Net cash flows from operating activities = Total Cash Receipts - Total Cash Disbursement

= ($90000 + $100000 + $120300) - ($110000 + $100445 + $117846)

= $310300 - $328291

= - $17,991 (Outflow)

Solution C:

Net cash flows from financing activities = Borrowing - Repayments

= $5000 + $445 - $2454

= $2,991 (Inflow)