Czarina Café wants to prepare a cash budget for September through December. Using the following information, prepare the cash budget schedule and interpret the results. Sales were P50,000 in June and P60,000 in July. Sales have been forecasted to be P65,000, P72,000, P63,000, P59,000, and P56,000 for months of August, September, October, November, and December, respectively. Based on the past history and current credit terms offered by the firm, Czarina Café has estimated the following payment schedules for the sales: 10 percent of sales were on cash basis, 50 percent will be collected in the month following the sale, 30 percent will be collected in the second month following the sale, 10 percent of the total sales will be collected in the third month following the sale. Every four months (three times a year) P500 of dividends from investments are expected. The first dividend payment was received in January. Purchases are 60 percent of sales, 15 percent of which are paid in cash, 65 percent are paid one month later, and the rest is paid two months after purchase. P8,000 dividends are paid twice a year (March and September) The monthly rent is P2,000. Taxes are P6,500 payable in December. A new asset will be purchased in October for P2,300. P1,500 interest will be paid in November. P1,000 loan payments are paid every month. Wages and Salaries are P1,000 plus 5 percent of sales in each month. August’s ending cash balance is P3,000. Czarina Café would like to maintain a minimum cash balance of P10,000

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter8: Budgeting

Section: Chapter Questions

Problem 1E: At the beginning of the school year, Craig Kovar decided to prepare a cash budget for the months of...

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Czarina Café wants to prepare a cash budget for September through December. Using the following information, prepare the cash budget schedule and interpret the results. Sales were P50,000 in June and P60,000 in July. Sales have been forecasted to be P65,000, P72,000, P63,000, P59,000, and P56,000 for months of August, September, October, November, and December, respectively. Based on the past history and current credit terms offered by the firm, Czarina Café has estimated the following payment schedules for the sales: 10 percent of sales were on cash basis, 50 percent will be collected in the month following the sale, 30 percent will be collected in the second month following the sale, 10 percent of the total sales will be collected in the third month following the sale. Every four months (three times a year) P500 of dividends from investments are expected. The first dividend payment was received in January. Purchases are 60 percent of sales, 15 percent of which are paid in cash, 65 percent are paid one month later, and the rest is paid two months after purchase. P8,000 dividends are paid twice a year (March and September) The monthly rent is P2,000. Taxes are P6,500 payable in December. A new asset will be purchased in October for P2,300. P1,500 interest will be paid in November. P1,000 loan payments are paid every month. Wages and Salaries are P1,000 plus 5 percent of sales in each month. August’s ending cash balance is P3,000. Czarina Café would like to maintain a minimum cash balance of P10,000

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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