Question

QUESTION 15:

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	$	60,000		$	76,000		$	52,000
Budgeted cash payments for
Direct materials		16,960			14,240			14,560
Direct labor		4,840			4,160			4,240
Factory overhead		21,000			17,600			18,000

Sales are 30% cash and 70% 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; $45,800 in accounts receivable; $5,300 in accounts payable; and a $5,800 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 ($4,800 per month), and rent ($7,300 per month).

PART 1:  Prepare a cash receipts budget for July, August, and September. (Negative balances and Loan repayment amounts (if any) should be indicated with minus sign. Enter your final answers in whole dollars.)

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

PART 2: ) Prepare a cash budget for each of the months of July, August, and September.

Answer 1

Part 1	BUILT-TIGHT
	CASH RECEIPTS BUDGET
	FOR JULY, AUGUST AND SEPTEMBER
		JULY	AUGUST	SEPTEMBER
	Budgeted Sales	$60,000	$76,000	$52,000
	Less : Ending Accounts Receivables	$42,000	$53,200	$36,400
	(70%*Sales)
	Cash Receipts from
	Cash Sales	$18,000	$22,800	$15,600
	Prior month cash collection	$45,800	$42,000	$53,200
	Total Cash Receipts	$63,800	$64,800	$68,800
Part 2	BUILT TIGHT COMPANY
	CASH BUDGET
	For the Month of July, August and September
		JULY	AUGUST	SEPTEMBER
	Beginning Cash Balance	$15,000	$15,000	$21,112
	Cash Receipts	$63,800	$64,800	$68,800
	Total Cash Available	78800	79800	89912.42
	Cash Disbursements
	Cash Payment for Materials	$16,960	$14,240	$14,560
	Cash Payment for Labor	$4,840	$4,160	$4,240
	Cash Payment for factory overhead	$21,000	$17,600	$18,000
	Sales Comission - 10% of Sales	$6,000	$7,600	$5,200
	Office Salaries	$4,800	$4,800	$4,800
	Rent	$7,300	$7,300	$7,300
	Interest on Bank Loan	$58	$29.58	$0
	Total Cash Payments	$60,958	$55,730	$54,100
	Preliminary cash balance	$17,842	$24,070	$35,812
	Additional Loan from Bank	$0	$0	$0
	Repayment of Loan to Bank	($2,842)	($2,958)	$0
	Ending Cash Balance	$15,000	$21,112	$35,812
	Loan Balance
		July	August	September
	Loan balance beginning	$5,800	$2,958	0
	Additional Loan/Repayment	($2,842)	($2,958)	0
	Loan Balance - Ending	$2,958	$0	0
	Interest 5800*1% - July	$58
	Repayment of Loan in July = 17842-15000	$2,842
	Interest in August = 2958*1%	29.58