Question

Financial controller of the Mondavi Hotel has the following information about estimated sales revenue and operating expenses for September, October and November.

	September		October		November
Sales	820,000		845,000		880,000
Operating Expenses	295,000		310,000		330,000

The controller knows that cash sales are 30% of total sales and remaining sales are on credit. For the collection of credit sales, 50% are collected in the month of sales while the remaining 50% is collected in the following month. Mondavi Hotel pays 60% of the operating expenses in cash in the month they incur and remaining 40% is paid in the following month. In addition to this information, the controller is informed that:

• In October, Mondavi Hotel will replace the range in the main kitchen, which will cost $14,000 and will be paid in cash immediately.
• Each month, $20,000 will paid to a national bank to reduce an outstanding long-term debt.

Mondavi Hotel uses cash receipts and disbursement method for cash budgets.

Given the information:

If the beginning cash balance for October is $150,000, what would be the ending balance in October?

Answer 1

Mondavi Hotel
Sales Budget
	September	October	november	Quarter
Sales	820000	845000	880000	2545000
Mondavi Hotel
Cash Sales	30%
Credit Sales	70%
	September	October	november	Quarter
Cash Sales	$                   2,46,000.00	$                       2,53,500.00	$                         2,64,000.00	$    7,63,500.00
Credit Sales	$                   5,74,000.00	$                       5,91,500.00	$                         6,16,000.00	$ 17,81,500.00
	Schedule of Expected Cash Collection
	September	October	November	Quarter
Cash Sales	$                   2,46,000.00	$                       2,53,500.00	$                         2,64,000.00	$    7,63,500.00
Credit Sales of September	$                   2,87,000.00	$                       2,87,000.00		$    5,74,000.00
Credit Sales of October		$                       2,95,750.00	$                         2,95,750.00	$    5,91,500.00
Credit Sales of November			$                         3,08,000.00	$    3,08,000.00
Total Cash Collection	$                   5,33,000.00	$                       8,36,250.00	$                         8,67,750.00	$ 22,37,000.00
	September	October	November
Cash Sales	($820000*30%)	($845000*30%)	($880000*30%)
Credit Sales of September	($820000*70%*50%)	($820000*70%)*50%)
Credit Sales of October		($845000*70%)*50%)	($845000*70%*50%)
Credit Sales of November			($880000*70%*50%)
Operating Expenses
	September	October	november	Quarter
Operating Expenses	$                   2,95,000.00	$                       3,10,000.00	$                         3,30,000.00	$    9,35,000.00
	Expected Cash Disbursement for Operating Expenses
	September	October	November	Quarter
September Operating Expenses	$                   1,77,000.00	$                       1,18,000.00		$    2,95,000.00
October Operating Expenses		$                       1,86,000.00	$                         1,24,000.00	$    3,10,000.00
November Operating Expenses			$                         1,98,000.00	$    1,98,000.00
Total Cash Payment	$                   1,77,000.00	$                       3,04,000.00	$                         3,22,000.00	$    8,03,000.00
	September	October	November
September Operating Expenses	($295000*60%)	($295000*40%)
October Operating Expenses		($310000*60%)	($310000*40%)
November Operating Expenses			($330000*60%)
Mondavi Hotel
Cash Budget
Months	October
Cash Balance	$                   1,50,000.00
Add: Collections from customer	$                   8,36,250.00
Total Cash available=(A)	$                   9,86,250.00
Less: Disbursement
Operating Expenses	$                   3,04,000.00
Main Kitchen	$                      14,000.00
Total Disbursemnts=(B)	$                   3,18,000.00
Excess/Deficiency of receipts over disbursement=(C )=(A)-(B)	$                   6,68,250.00
Financing:
National Bank(Repayment of outstanding long term debt)=(D )	$                      20,000.00
Cash Balance ,ending in October=(C )-(D )	$                   6,48,250.00