Cash Budget The owner of a building supply company has requested a cash budget for June. After examining the records of the company, you find the following: Cash balance on June 1 is $1,436. Actual sales for April and May are as follows: April May Cash sales $10,000 $18,000 Credit sales 28,900 35,000 Total sales $38,900 $53,000 Credit sales are collected over a 3-month period: 40% in the month of sale, 30% in the second month, and 20% in the third month. The sales collected in the third month are subject to a 2% late fee, which is paid by those customers in addition to what they owe. The remaining sales are uncollectible. Inventory purchases average 68% of a month's total sales. Of those purchases, 20% are paid for in the month of purchase. The remaining 80% are paid for in the following month. Salaries and wages total $11,750 per month, including a $4,500 salary paid to the owner. Rent is $4,800 per month. Taxes to be paid in June are $6,780. The owner also tells you that he expects cash sales of $18,600 and credit sales of $54,000 for June. No minimum cash balance is required. The owner of the company doesn’t have access to short-term loans. Required: 1. Prepare a cash budget for June. Include supporting schedules for cash collections and cash payments. Round calculations and final answers to the nearest dollar. Be sure to enter percentages as whole numbers.

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 34E: A companys sales for the coming months are as follows: About 20 percent of sales are cash sales, and...

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Cash Budget

The owner of a building supply company has requested a cash budget for June. After examining the records of the company, you find the following:

Cash balance on June 1 is $1,436.
Actual sales for April and May are as follows:

April May

Cash sales $10,000 $18,000

Credit sales 28,900 35,000

Total sales $38,900 $53,000
Credit sales are collected over a 3-month period: 40% in the month of sale, 30% in the second month, and 20% in the third month. The sales collected in the third month are subject to a 2% late fee, which is paid by those customers in addition to what they owe. The remaining sales are uncollectible.
Inventory purchases average 68% of a month's total sales. Of those purchases, 20% are paid for in the month of purchase. The remaining 80% are paid for in the following month.
Salaries and wages total $11,750 per month, including a $4,500 salary paid to the owner.
Rent is $4,800 per month.
Taxes to be paid in June are $6,780.

The owner also tells you that he expects cash sales of $18,600 and credit sales of $54,000 for June. No minimum cash balance is required. The owner of the company doesn’t have access to short-term loans.

Required:

1. Prepare a cash budget for June. Include supporting schedules for cash collections and cash payments. Round calculations and final answers to the nearest dollar. Be sure to enter percentages as whole numbers.

Cash Budget
For June
Beginning cash balance
Collections:
Cash sales
Credit sales:
Current month
%
May credit sales
%
April credit sales
Total cash available
Less disbursements:
Inventory purchases:
Current month
Prior month
%
Salaries and wages
Rent
Taxes
Total cash needs
Excess of cash available over needs
2. Conceptual Connection: Did the business show a negative cash balance for June?

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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