anet Wooster owns a retail store that sells new and used sporting equipment. Janet has requested a cash budget for October. After examining the records of the company, you find the following: Cash balance on October 1 is $1,130. Actual sales for August and September are as follows: August September Cash sales $6,000 $4,500 Credit sales 58,000 61,000 Total sales $64,000 $65,500 Credit sales are collected over a three-month period: 40 percent in the month of sale, 36 percent in the next month, and 22 percent in the second month after the sale. The remaining sales are uncollectible. Inventory purchases average 70 percent of a month’s total sales. Of those purchases, 45 percent are paid for in the month of purchase. The remaining 55 percent are paid for in the following month. Salaries and wages total $3,850 per month. Rent is $3,150 per month. Taxes to be paid in October are $1,635. Janet usually withdraws $3,500 each month as her salary. Advertising is $1,500 per month. Other operating expenses total $3,800 per month. Internet and telephone fees are $320 per month. Janet tells you that she expects cash sales of $5,000 and credit sales of $64,000 for October. She likes to have $3,000 on hand at the end of the month and is concerned about the potential October ending balance. Required:

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter8: Budgeting For Planning And Control

Section: Chapter Questions

Problem 19E: Tiger Drug Store carries a variety of health and beauty aids, including 500-count bottles of...

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anet Wooster owns a retail store that sells new and used sporting equipment. Janet has requested a cash budget for October. After examining the records of the company, you find the following:

Cash balance on October 1 is $1,130.
Actual sales for August and September are as follows:

August September

Cash sales $6,000     $4,500

Credit sales 58,000     61,000

    Total sales $64,000     $65,500
Credit sales are collected over a three-month period: 40 percent in the month of sale, 36 percent in the next month, and 22 percent in the second month after the sale. The remaining sales are uncollectible.
Inventory purchases average 70 percent of a month’s total sales. Of those purchases, 45 percent are paid for in the month of purchase. The remaining 55 percent are paid for in the following month.
Salaries and wages total $3,850 per month.
Rent is $3,150 per month.
Taxes to be paid in October are $1,635.
Janet usually withdraws $3,500 each month as her salary.
Advertising is $1,500 per month.
Other operating expenses total $3,800 per month.
Internet and telephone fees are $320 per month.

Janet tells you that she expects cash sales of $5,000 and credit sales of $64,000 for October. She likes to have $3,000 on hand at the end of the month and is concerned about the potential October ending balance.

Required:

Prepare a cash budget for October. Include supporting schedules for cash collections and cash payments. Round your intermediate computations and final answers to the nearest dollar.

Wooster Sporting Goods StoreCash BudgetFor the Month of October

Beginning cash balance	$fill in the blank 1
Collections:
Cash sales	fill in the blank 2
Credit sales:
October	fill in the blank 3
September	fill in the blank 4
August	fill in the blank 5
Total cash available		$fill in the blank 6
Disbursements:
Inventory purchases:
October	$fill in the blank 7
September	fill in the blank 8
Salaries and wages	fill in the blank 9
Rent	fill in the blank 10
Taxes	fill in the blank 11
Other operating expenses	fill in the blank 12
Owner withdrawal	fill in the blank 13
Advertising	fill in the blank 14
Internet and telephone	fill in the blank 15	fill in the blank 16
Ending cash balance		$fill in the blank 17

Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.

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