Question

Exercise 20-32A Merchandising: Cash budget LO P4

Kelsey is preparing its master budget for the quarter ended September 30. Budgeted sales and cash payments for merchandise for the next three months follow:

Budgeted	July					August					September
Sales		$	63,500				$	80,500				$	48,500
Cash payments for merchandise			41,400					33,100					33,900

Sales are 15% cash and 85% on credit. All credit sales are collected in the month following the sale. The June 30 balance sheet includes balances of $12,800 in cash; $46,600 in accounts receivable; $5,000 in accounts payable; and a $2,500 balance in loans payable. A minimum cash balance of $12,500 is required. Loans are obtained at the end of any month when a cash shortage occurs. Interest is 2% 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 (5% of sales), office salaries ($4,500 per month), and rent ($7,000 per month).

  
(1) Prepare a cash receipts budget for July, August, and September.
(2) Prepare a cash budget for each of the months of July, August, and September.

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

• Required 1
• Required 2

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

	July August September Total sales $63,500 $80,500 $48,500 Cash sales 15% Credit sales 85% KELSEY Cash Receipts Budget For July, August, and September July August September Cash sales Collections of accounts receivable Total cash receipts

• Required 1
• Required 2

• Prepare a cash budget for each of the months of July, August, and September. (Negative balances and Loan repayment amounts (if any) should be indicated with minus sign. Round your final answers to the nearest whole dollar.)

  	KELSEY Cash Budget For July, August, and September July August September Beginning cash balance $12,800 Total cash available Cash payments for: Total cash payments Preliminary cash balance Ending cash balance Loan balance July August September Loan balance - Beginning of month $2,500 Additional loan (loan repayment) Loan balance - End of month

Answer 1

1)

		July	August	September
Total sales		63,500	80,500	48,500
Cash sales	15%	9,525	12,075	7,275
Credit sales	85%	53,975	68,425	41,225
KELSEY
Cash Budget
For July, August, and September
		July	August	September
Cash sales		9,525	12,075	7,275
Collections of accounts receivable		46,600	53,975	68,425
Total cash receipts		56,125	66,050	75,700

2)

KELSEY

Cash Budget

For July, August, and September

	July	August	September
Beginning cash balance	12,800	12,500	27,681
cash sales	9,525	12,075	7,275
Collections on account	46,600	53,975	68,425
Total cash available	68,925	78,550	103,381
Cash disbursements:
payments for merchandise	41,400	33,100	33,900
sales commissions	3,175	4,025	2,425
Office salaries	4,500	4,500	4,500
Rent	7,000	7,000	7,000
Interest on bank loan	50	44	0
Total cash disbursements	56,125	48,669	47,825
Premilinary cash balance	12,800	29,881	55,556
Additional loan (loan repayment)	-300	-2,200	0
Ending cash balance	12,500	27,681	55,556
Loan balance
	July	August	September
Loan balance - Beginning of month	2,500	2,200	0
Additional loan (loan repayment)	-300	-2,200	0
Loan balance - Beginning of month	2,200	0	0