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Cash budgetlong dashBasic Grenoble Enterprises had sales of $ 50 comma 200 in March and $...

Cash budgetlong dashBasic Grenoble Enterprises had sales of $ 50 comma 200 in March and $ 59 comma 800 in April. Forecast sales for May, June, and July are $ 70 comma 300 , $ 79 comma 600 , and $ 100 comma 400 , respectively. The firm has a cash balance of $ 5 comma 300 on May 1 and wishes to maintain a minimum cash balance of $ 5 comma 300. Given the following data, prepare and interpret a cash budget for the months of May, June, and July. (1) The firm makes 17 % of sales for cash, 62 % are collected in the next month, and the remaining 21 % are collected in the second month following sale. (2) The firm receives other income of $ 1 comma 700 per month. (3) The firm's actual or expected purchases, all made for cash, are $ 50 comma 500 , $ 70 comma 200 , and $ 80 comma 400 for the months of May through July, respectively. (4) Rent is $ 2 comma 700 per month. (5) Wages and salaries are 9 % of the previous month's sales. (6) Cash dividends of $ 3 comma 400 will be paid in June. (7) Payment of principal and interest of $ 4 comma 100 is due in June. (8) A cash purchase of equipment costing $ 6 comma 300 is scheduled in July. (9) Taxes of $ 5 comma 700 are due in June.

Solutions

Expert Solution

1) CASH BUDGET: March April May June July Total
Beginning balance 5300 10003 3500 5300
Receipts:
Cash sales 11951 13532 17068 42551
Cash collected from receivables 49634 58349 66068 174051
[See worksheet below]
Other income 1700 1700 1700 5100
Total receipts 63285 73581 84836 221702
Total cash available 68585 83584 88336 227002
Disbursements:
Cash purchases 50500 70200 80400 201100
Rent 2700 2700 2700 8100
Wages and salaries 5382 6327 7164 18873
Dividends 3400 3400
Payment of principal and interest 4100 4100
Purchase of equipment 6300 6300
Payment of taxes 5700 5700
Total disbursements 58582 92427 96564 247573
Surplus/(Deficit) 10003 -8843 -8228 -20571
Financing:
Borrowing required 0 12343 11728 24071
Repayment of borrowings 0 0 0 0
Payment of interest 0 0 0 0
Total financing 0 12343 11728 24071
Ending balance of cash 10003 3500 3500 3500
WORKSHEET:
Sales 50200 59800 70300 79600 100400
Cash sales 8534 10166 11951 13532 17068
Collection from receivables:
From sale two months old 12558 14763 16716
From sale one month old 37076 43586 49352
Total collection from receivables 49634 58349 66068
2) June and July have cash deficits and to maintain the minimum cash balance borrowings are required to the
extent of $12343 and $11728 respectively. Arrangements for a line of credit is to be initiated early.

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