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In: Accounting

Castor, Inc., is preparing its master budget for the quarter ended June 30. Budgeted sales and...

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 $ 30,000 $ 42,000 $ 26,000
Cash payments for merchandise 24,200 14,800 13,500


Sales are 80% cash and 20% on credit. All credit sales are collected in the month following the sale. The March 31 balance sheet includes balances of $14,000 in cash, $14,000 in accounts receivable, $11,000 in accounts payable, and a $4,000 balance in loans payable. A minimum cash balance of $14,000 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 (4% of sales), office salaries ($5,000 per month), and rent ($7,000 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.)

I would like to see the details please !

Solutions

Expert Solution

Ans. Cash budget for the month of April, May and June :
Particulars April May June
Opening Balance          14,000          14,000          14,000
Sale          24,000          33,600          20,800
Account Receivable          14,000            6,000            8,400
      Total          52,000          53,600          43,200
Less:
Payment for Merchandise          24,200          14,800          13,500
Commission on Sales (10%)            3,000            4,200            2,600
Shipping Charges (4%)            1,200            1,680            1,040
Office salaries            5,000            5,000            5,000
Rent            7,000            7,000            7,000
Interest on Loan                  24
    Total Expenses          40,400          32,704          29,140
Balance cash          11,600          20,896          14,060
Add: Loan            2,400
Less: Repayment of loan -6,896 -60
Ending cash balance          14,000          14,000          14,000
Working Notes:
1) Calculation of Cash Sale :
Particulars April May June
Sale          30,000          42,000          26,000
Cash sale % 80% 80% 80%
Cash Sale ($)          24,000          33,600          20,800
2) Calculation of Credit Sale :
Particulars April May June
Sale          30,000          42,000          26,000
Less: Cash Sale          24,000          33,600          20,800
Credit Sale            6,000            8,400            5,200
3) Calculation of cash received from Accounts receivables :
Particulars April May June
Opening balance          14,000
Credit sale            6,000            8,400            5,200
Cash received          14,000            6,000            8,400
4) Calculation of Commission on sale :
Particulars April May June
Sale          30,000          42,000          26,000
Cash sale % 10% 10% 10%
Cash Sale ($)            3,000            4,200            2,600
5) Calculation of Shipping Charges :
Particulars April May June
Sale          30,000          42,000          26,000
Cash sale % 4% 4% 4%
Cash Sale ($)            1,200            1,680            1,040

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