Question

Castor, Inc., is preparing its master budget for the quarter ended June 30. Budgeted sales and cash payments for merchandise for the next three months follow:

Budgeted	April			May			June
Sales	$	31,000		$	41,000		$	25,000
Cash payments for merchandise		22,200			15,800			16,200

Sales are 70% cash and 30% on credit. All credit sales are collected in the month following the sale. The March 31 balance sheet includes balances of $13,000 in cash, $13,000 in accounts receivable, $11,000 in accounts payable, and a $3,000 balance in loans payable. A minimum cash balance of $13,000 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 include sales commissions (10% of sales), shipping (2% of sales), office salaries ($4,000 per month), and rent ($6,000 per month).

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

Answer 1

Cash budget
	Apr	May	June	Total
Opening cash Balance	13,000	13,730	15,960	13,000
Add: receipts
Collection from Customers	34,700	38,000	29,800	102,500
Total Cash available	47,700	51,730	45,760	115,500
Less: Disbursements
For Inventory Purchase	22,200	15,800	16,200	54,200
For Operating Expenses:
Sales Commision - 10% of Sales	3,100	4,100	2,500	9,700
Shipping - 2% of Sales	620	820	500	1,940
Office Salaries	4,000	4,000	4,000	12,000
Rent Expense	6,000	6,000	6,000	18,000
Total Disbursements	35,920	30,720	29,200	95,840
Excess (deficiency) of cash available over disbursements	11,780	21,010	16,560	19,660
Financing:
Borrowings	2,000	-	-	2,000
Repayment	-	(5,000)	-	(5,000)
Payment of interet - Bank loan	(50)	(50)	-	(100)
Total Financing
Net Cash Balance Closing	13,730	15,960	16,560	16,560

Sales Budget
	Apr	May	June	Total
Sales in $	31,000	41,000	25,000	97,000
Cash Sales -70%	21,700	28,700	17,500	67,900
Credit Sales - 30%	9,300	12,300	7,500	29,100
Answer 1.
Schedule of Expected Cash Collections from Sales
	Apr	May	June	Total
Cash Sales	21,700	28,700	17,500	67,900
Sales on account:
Accounts Receivable - March	13,000			13,000
Apr Sales	-	9,300		9,300
May Sales	-	-	12,300	12,300
Total cash Collections	34,700	38,000	29,800	102,500