Question

In: Accounting

Month Sales January $100,000 February $120,000 March $150,000 April $180,000 May $150,000 June $120,000 July $150,000...

Month

Sales

January

$100,000

February

$120,000

March

$150,000

April

$180,000

May

$150,000

June

$120,000

July

$150,000

August

$180,000

Actual November and December 2018 sales were $200,000 and $90,000, respectively. Cash sales are 45% of the total and the rest are on credit. About 70% of credit sales are typically collected one month after the sale and 30% the second month. Monthly inventory purchases represent 50% of the following month’s sales. The firm pays 40% of its inventory purchases in cash and the remainder in the following month. Wages are expected to be 25% of the month’s sales, plus commissions to sales associates estimated to be 10% of collectable sales. A major capital expenditure of $22,000 is expected in April and a quarterly dividend of $10,000 will be paid to shareholders in March and June. Monthly rent is $2,500 and other maintenance expenses are estimated at 15% of sales. The firm has an ending cash balance of $20,000 for December 2018.

Required:

  1. prepare a cash budget based on the information above.

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