Question

Sunny Corporation expects to have the following balances on July 1, 2020: Cash, $3,000; Accounts receivable, $135,000; and Accounts payable, $100,000. Its budgeted sales, merchandise purchases, and various expenses for the next three months follow.

	July	August	September
Sales	$220,000	$300,000	$380,000
Merchandise purchases	210,000	180,000	220,000
Payroll, rent, and other expenses	96,000	41,000	51,000

20% of the sales are for cash. Of the remaining credit sales, 30% are collected in the same month as the sale, and 70% are collected the month following the sale.

All merchandise is purchased on credit. 20% of the balance is paid in the month of the purchase, and the remaining 80% is paid in the month following the purchase. All other cash expenses are paid in the month incurred. Included in the payroll, rent, and other expenses is $10,000 of depreciation expense.

The company requires a minimum cash balance of $10,000. If cash falls below $10,000, the company borrows on a line of credit with an annual rate of interest of 12% to bring the balance to $10,000. If cash is above $10,000, the company repays as much as possible on any outstanding line of credit but does not allow cash to fall below $10,000. On July 1, the line of credit has a $0 balance.

Complete the following blanks to prepare the cash budget. If a blank has an amount of $0, you are required to enter 0. Note: You have schedules provided below the cash budget that will need to be completed to enable you to prepare certain calculations needed for the cash budget.

Sunny Corporation

Cash Budget

July, 2020 - September, 2020

	July	August	September
Total cash available
Less cash payments for:
Interest expense
Total cash payments
Loan activity:
Additional loan from bank
Repayment of loan to bank
Ending cash balance
Loan balance, end of month

Schedule to Calculate Cash Sales and Credit Sales

	July	August	September
Cash Sales
Credit Sales
Total Sales

Cash Receipts

	July	August	September
Cash sales
Accounts receivable
credit sales
credit sales
credit sales
Total cash receipts

Cash payments for Merchandise Purchases

	July	August	September
Accounts payable
merchandise purchases
merchandise purchases
merchandise purchases
Total cash payments for merchandise purchases

Answer 1

Budgets