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 $786. 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,
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
The owner of a building supply company has requested a
- Cash balance on June 1 is $786.
- 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 66% 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 $5,200 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 | $fill in the blank eb7f2200705002c_1 | |||
| Collections: | ||||
| Cash sales | fill in the blank eb7f2200705002c_2 | |||
| Credit sales: | ||||
| Current month | ||||
| $fill in the blank eb7f2200705002c_3 × fill in the blank eb7f2200705002c_4 % | fill in the blank eb7f2200705002c_5 | |||
| May credit sales | ||||
| $fill in the blank eb7f2200705002c_6 × fill in the blank eb7f2200705002c_7 % | fill in the blank eb7f2200705002c_8 | |||
| April credit sales | fill in the blank eb7f2200705002c_9 | |||
| Total cash available | $fill in the blank eb7f2200705002c_10 | |||
| Less disbursements: | ||||
| Inventory purchases: | ||||
| Current month | ||||
| $fill in the blank eb7f2200705002c_11 × fill in the blank eb7f2200705002c_12 % | $fill in the blank eb7f2200705002c_13 | |||
| Prior month | ||||
| $fill in the blank eb7f2200705002c_14 × fill in the blank eb7f2200705002c_15 % | fill in the blank eb7f2200705002c_16 | |||
| Salaries and wages | fill in the blank eb7f2200705002c_17 | |||
| Rent | fill in the blank eb7f2200705002c_18 | |||
| Taxes | fill in the blank eb7f2200705002c_19 | |||
| Total cash needs | fill in the blank eb7f2200705002c_20 | |||
| Excess of cash available over needs | $fill in the blank eb7f2200705002c_21 |
2. Conceptual Connection: Did the business show a negative cash balance for June?
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