Restaurant Supply is preparing its cash budgets for the first two months of the upcoming year. Here is the information about the company's upcoming cash receipts and cash disbursements: a. Sales are 70% cash and 30% credit. Credit sales are collected 30% in the month of sale and the remainder in the month after sale. Actual sales in December were $56,000. Schedules of budgeted sales for the two months of the upcoming year are as follows: Budgeted Sales Revenue January. . . . . . . . . . . . . . . $61,000 February. . . . . . . . . . . . . . $72,000 b. Actual purchases of direct materials in December were $24,500. The company's purchases of direct materials in January are budgeted to be $20,000 and $26,500 in February. All purchases are paid 30% in the month of purchase and 70% the following month. c. Salaries and sales commissions are also paid half in the month earned and half the next month. Actual salaries were $10,000 in December. Budgeted salaries in January are $11,000 and February budgeted salaries are $12,500. Sales commissions each month are 10% of that month's sales. d. Rent expense is $3,100 per month. e. Depreciation is $2,400 per month. f. Estimated income tax payments are made at the end of January. The estimated tax payment is projected to be $13,500. g. The cash balance at the end of the prior year was $18,000. Requirement 1a. Prepare a schedule of budgeted cash collections for January and February. Show totals for each month and totals for January and February combined. Gary's Restaurant Supply Cash Collections Budget For the Months Ended January 31 and February 28 January Cash sales Collection on credit sales Total cash collections February Total b. Prepare a schedule of budgeted cash payments for purchases for January and February. Show totals for each month and totals for January and February combined. Gary's Restaurant Supply Cash Payments for Material Purchases Budget For the Months Ended January 31 and February 28 January 30% of current month DM purchases 70% of last month's DM purchases Total cash payments February Total c. Prepare a schedule of budgeted cash payments for operating expenses for January and February. Show totals for each month and totals for January and February combined. (If a box is not used in the table leave the box empty; do not enter a zero. Round all amounts to the nearest dollar.) Gary Restaurant Supply Cash Payments for Operating Expenses Budget For the Months Ended January 31 and February 28 January Variable cash operating expenses: Sales commissions: December Sales commissions: January Sales commissions: February Total variable cash operating expenses Fixed cash operating expenses: Sales salaries: December Sales salaries: January Sales salaries: February Rent expense Tax expense Total fixed cash operating expenses Total cash payments for operating expenses February Total Requirement 2. Prepare a combined cash budget for January and February. If no financing activity takes place, what is the budgeted cash balance on February 28? Gary's Restaurant Supply Combined Cash Budget For the Months Ended January 31 and February 28 January February 2 months Beginning cash balance Plus: Cash collections from customers Total cash available Less cash payments: Direct materials purchases Operating expenses Total cash payments Ending cash balance

Restaurant Supply is preparing its cash budgets for the first two months of the upcoming year. Here is the information about the company's upcoming cash receipts and cash disbursements: a. Sales are 70% cash and 30% credit. Credit sales are collected 30% in the month of sale and the remainder in the month after sale. Actual sales in December were $56,000. Schedules of budgeted sales for the two months of the upcoming year are as follows: Budgeted Sales Revenue January. . . . . . . . . . . . . . . $61,000 February. . . . . . . . . . . . . . $72,000 b. Actual purchases of direct materials in December were $24,500. The company's purchases of direct materials in January are budgeted to be $20,000 and $26,500 in February. All purchases are paid 30% in the month of purchase and 70% the following month. c. Salaries and sales commissions are also paid half in the month earned and half the next month. Actual salaries were $10,000 in December. Budgeted salaries in January are $11,000 and February budgeted salaries are $12,500. Sales commissions each month are 10% of that month's sales. d. Rent expense is $3,100 per month. e. Depreciation is $2,400 per month. f. Estimated income tax payments are made at the end of January. The estimated tax payment is projected to be $13,500. g. The cash balance at the end of the prior year was $18,000. Requirement 1a. Prepare a schedule of budgeted cash collections for January and February. Show totals for each month and totals for January and February combined. Gary's Restaurant Supply Cash Collections Budget For the Months Ended January 31 and February 28 January Cash sales Collection on credit sales Total cash collections February Total b. Prepare a schedule of budgeted cash payments for purchases for January and February. Show totals for each month and totals for January and February combined. Gary's Restaurant Supply Cash Payments for Material Purchases Budget For the Months Ended January 31 and February 28 January 30% of current month DM purchases 70% of last month's DM purchases Total cash payments February Total c. Prepare a schedule of budgeted cash payments for operating expenses for January and February. Show totals for each month and totals for January and February combined. (If a box is not used in the table leave the box empty; do not enter a zero. Round all amounts to the nearest dollar.) Gary Restaurant Supply Cash Payments for Operating Expenses Budget For the Months Ended January 31 and February 28 January Variable cash operating expenses: Sales commissions: December Sales commissions: January Sales commissions: February Total variable cash operating expenses Fixed cash operating expenses: Sales salaries: December Sales salaries: January Sales salaries: February Rent expense Tax expense Total fixed cash operating expenses Total cash payments for operating expenses February Total Requirement 2. Prepare a combined cash budget for January and February. If no financing activity takes place, what is the budgeted cash balance on February 28? Gary's Restaurant Supply Combined Cash Budget For the Months Ended January 31 and February 28 January February 2 months Beginning cash balance Plus: Cash collections from customers Total cash available Less cash payments: Direct materials purchases Operating expenses Total cash payments Ending cash balance

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter4: Financial Planning And Forecasting

Section: Chapter Questions

Problem 4P

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Question

Restaurant Supply is preparing its cash budgets for the first two months of the upcoming year. Here is the information about the company's upcoming cash receipts and cash disbursements:

Sales are

70%

cash and

30%

credit. Credit sales are collected

30%

in the month of sale and the remainder in the month after sale. Actual sales in December were

$56,000.

Schedules of budgeted sales for the two months of the upcoming year are as follows:

	Budgeted Sales Revenue
January. . . . . . . . . . . . . . .		$61,000
February. . . . . . . . . . . . . .		$72,000

Actual purchases of direct materials in December were

$24,500.

The company's purchases of direct materials in January are budgeted to be

$20,000

and

$26,500

in February. All purchases are paid

30%

in the month of purchase and

70%

the following month.

Salaries and sales commissions are also paid half in the month earned and half the next month. Actual salaries were

$10,000

in December. Budgeted salaries in January are

$11,000

and February budgeted salaries are

$12,500.

Sales commissions each month are

10%

of that month's sales.

Rent expense is

$3,100

per month.

Depreciation is

$2,400

per month.

Estimated income tax payments are made at the end of January. The estimated tax payment is projected to be

$13,500.

The cash balance at the end of the prior year was

$18,000.

Requirement 1a. Prepare a schedule of budgeted cash collections for January and February. Show totals for each month and totals for January and February combined.

Gary's Restaurant Supply

Cash Collections Budget

For the Months Ended January 31 and February 28

	January
Cash sales
Collection on credit sales
Total cash collections

February

Total

b. Prepare a schedule of budgeted cash payments for purchases for January and February. Show totals for each month and totals for January and February combined.

Gary's Restaurant Supply

Cash Payments for Material Purchases Budget

For the Months Ended January 31 and February 28

	January
30% of current month DM purchases
70% of last month's DM purchases
Total cash payments

February

Total

c. Prepare a schedule of budgeted cash payments for operating expenses for January and February. Show totals for each month and totals for January and February combined. (If a box is not used in the table leave the box empty; do not enter a zero. Round all amounts to the nearest dollar.)

Gary Restaurant Supply

Cash Payments for Operating Expenses Budget

For the Months Ended January 31 and February 28

	January
Variable cash operating expenses:
Sales commissions: December
Sales commissions: January
Sales commissions: February
Total variable cash operating expenses
Fixed cash operating expenses:
Sales salaries: December
Sales salaries: January
Sales salaries: February
Rent expense
Tax expense
Total fixed cash operating expenses
Total cash payments for operating expenses

February

Total

Requirement 2. Prepare a combined cash budget for January and February. If no financing activity takes place, what is the budgeted cash balance on February 28?

Gary's Restaurant Supply

Combined Cash Budget

For the Months Ended January 31 and February 28

	January	February	2 months
Beginning cash balance
Plus: Cash collections from customers
Total cash available
Less cash payments:
Direct materials purchases
Operating expenses
Total cash payments
Ending cash balance

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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