In: Accounting
Preparing a Cash Budget
La Famiglia Pizzeria provided the following information for the
month of October:...
Preparing a Cash Budget
La Famiglia Pizzeria provided the following information for the
month of October:
- Sales are budgeted to be $161,000. About 85% of sales is cash;
the remainder is on account.
- La Famiglia expects that, on average, 70% of credit sales will
be paid in the month of sale, and 28% will be paid in the following
month.
- Food and supplies purchases, all on account, are expected to be
$96,000. La Famiglia pays 25% in the month of purchase and 75% in
the month following purchase.
- Most of the work is done by the owners, who typically withdraw
$6,000 a month from the business as their salary. (Note:
The $6,000 is a payment in total to the two owners, not per
person.) Various part-time workers cost $7,300 per month. They are
paid for their work weekly, so on average 90% of their wages are
paid in the month incurred and the remaining 10% in the next
month.
- Utilities average $5,950 per month. Rent on the building is
$4,100 per month.
- Insurance is paid quarterly; the next payment of $1,400 is due
in October.
- September sales were $181,500 and purchases of food and
supplies in September equaled $130,000.
- The cash balance on October 1 is $2,147.
Required:
If required, round your answers to the nearest dollar.
1. Calculate the cash receipts expected in
October.
$
2. Calculate the cash needed in October to pay
for food purchases.
$
3. Prepare a cash budget for the month of
October.
La Famiglia Pizzeria |
Cash budget |
For the month of October |
Beginning balance |
$ |
Cash receipts |
|
Cash available |
$ |
Less: |
|
Payments for food and supplies purchases |
$ |
Owners' draw |
|
Workers' wages |
|
Utilities |
|
Rent |
|
Insurance |
|
Total disbursements |
$ |
Ending balance |