Question

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	$	55,000		$	71,000		$	57,000
Budgeted cash payments for
Direct materials		15,360			12,640			12,960
Direct labor		3,240			2,560			2,640
Factory overhead		19,400			16,000			16,400

Sales are 20% cash and 80% 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; $44,200 in accounts receivable; $3,700 in accounts payable; and a $4,200 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 ($3,200 per month), and rent ($5,700 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. (Negative balances and Loan repayment amounts (if any) should be indicated with minus sign. Enter your final answers in whole dollars.)

Answer 1

Cash receipts from sales
	July	August	September
Total Sales	$          55,000	$           71,000	$           57,000
Cash Sales	$          11,000	$           14,200	$           11,400
Collection for Previous month	$          44,200	$           44,000	$           56,800
Total Receipts	$          55,200	$           58,200	$           68,200

BUILT-TIGHT
Cash Budget
for July, August and September
	July	August	September
Beginning Cash Balance	$          15,000	$           15,000	$           24,544
Add: Collection from Sales and receivables	$          55,200	$           58,200	$           68,200
Total Cash Available	$          70,200	$           73,200	$           92,744
Cash Payments For
Direct material	$          15,360	$           12,640	$           12,960
Direct Labor	$             3,240	$             2,560	$             2,640
Overheads	$          19,400	$           16,000	$           16,400
Sales Commission	$             5,500	$             7,100	$             5,700
office salaries	$             3,200	$             3,200	$             3,200
Rent	$             5,700	$             5,700	$             5,700
Interest on loan	$                   42	$                   14	$                    -
Total Cash Payments	$          52,442	$           47,214	$           46,600
Preliminary Cash Balance	$          17,758	$           25,986	$           46,144
Loan Taken (Repaid)	$          (2,758)	$           (1,442)	$                    -
Ending Cash Balance	$          15,000	$           24,544	$           46,144
Loan Balance
Loan Balance	$             4,200	$             1,442	$                    -
Additional Loan (Loan Repayment)	$          (2,758)	$           (1,442)
Loan Balance End of Month	$             1,442	$                    -	$                    -