Question

Cash Budget

Khloe Company imports gift items from overseas and sells them to gift shops and department stores throughout the United States. Khloe Company provided the following information:

1. The October 31 balance in the cash account is $54,215.
2. All sales are on account. Sales in September were $1,000,000 and in October were $1,330,000.
3. November sales are expected to be $2,170,000.
4. In Khloe’s experience, 70 percent of sales are collected in the month of sale and 27 percent are collected in the month following sale. The remaining credit sales are uncollectible.
5. Khloe purchases all merchandise on account. Purchases in September were $715,000 and in October were $950,000. November purchases are expected to be $2,030,000 as Khloe prepares for the Christmas buying season. Fifteen percent of purchases are paid in the month of purchase, while the remainder is paid in the month following the purchase month.
6. Khloe Company has nine employees who are paid a total of $41,000 per month. Due to timing issues, about 90 percent of total wages are paid in the month earned and the remaining 10 percent are paid in the following month.
7. Rent for office and warehouse space is $12,200 paid monthly in cash.
8. Utilities average $6,400 per month and are paid in cash.
9. In November, Khloe expects to pay employment taxes of $6,650.
10. Since Khloe imports product from overseas, customs duty and shipping to the central location of 20 percent of current monthly purchase cost must be paid in the month of purchase.
11. Other cash expenses for November are expected to be $41,000.

Required:

Prepare a cash budget for Khloe Company for the month of November.

Khloe Company
Cash Budget
For the Month of November
Beginning balance, cash account	$
Received on account from sales in:
October
November
Total cash available	$
Disbursements:
Payments for purchases made in:
October
November
Salaries paid for work in:
October
November
Rent
Utilities
Employment taxes
Customs duty and shipping
Other cash expenses
Total disbursements	$
Ending cash balance	$

Answer 1

Khloe Company
Cash Budget
For the Month of November
Beginning balance, cash account	$            54,215
Received on account from sales in:
October	$         3,59,100	=1330000*27%
November	$      15,19,000	=2170000*70%
Total cash available	$      19,32,315
Disbursements:
Payments for purchases made in:
October	$         8,07,500	=950000*85%
November	$         3,04,500	=2030000*15%
Salaries paid for work in:
October	$              4,100	=41000*10%
November	$            36,900	=41000*90%
Rent	$            12,200
Utilities	$              6,400
Employment taxes	$              6,650
Customs duty and shipping	$         4,06,000	=2030000*20%
Other cash expenses	$            41,000
Total disbursements	$      16,25,250
Ending cash balance	$         3,07,065