Todd Enterprises is preparing a cash budget for the second quarter of the coming year. The following data have been forecasted: April May Sales ………………………………………………. $150,000 $157,500 Merchandise purchases …………………………… 107,000 112,400 Operating expenses: Payroll …………………………………… 13,600 14,280 Advertising ………………………………… 5,400 5,700 Rent ………………………………………… 2,500 2,500 Depreciation ……………………………… 7,500 7,500 End of April balances: Cash ………………………………………… 30,000 Bank loan payable ………………………… 26,000 Additional data: (1) Sales are 40% cash and 60% credit. The collection pattern for credit sales is 50% in the month following the sale and 50% in the month thereafter. Total sales in March were $125,000. (2) Purchases are all on credit, with 40% paid in the month of purchase and the balance paid in the following month. (3) Operating expenses are paid in the month they are incurred. (4) A minimum cash balance of $25,000 is required at the end of each month. (5) Loans are used to maintain the minimum cash balance. At the end of each month, interest of 1% per month is paid on the outstanding loan balance as of the beginning of the month. Repayments are made whenever excess cash is available. Prepare the company's cash budget for May. Show the ending loan balance at May 31.
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.
Todd Enterprises is preparing a
|
|
April |
|
May |
|
Sales ………………………………………………. |
$150,000 |
|
$157,500 |
|
Merchandise purchases …………………………… |
107,000 |
|
112,400 |
|
Operating expenses: |
|
|
|
|
Payroll …………………………………… |
13,600 |
|
14,280 |
|
Advertising ………………………………… |
5,400 |
|
5,700 |
|
Rent ………………………………………… |
2,500 |
|
2,500 |
|
|
7,500 |
|
7,500 |
|
End of April balances: |
|
|
|
|
Cash ………………………………………… |
30,000 |
|
|
|
Bank loan payable ………………………… |
26,000 |
|
|
Additional data:
(1) Sales are 40% cash and 60% credit. The collection pattern for credit sales is 50% in the month following the sale and 50% in the month thereafter. Total sales in March were $125,000.
(2) Purchases are all on credit, with 40% paid in the month of purchase and the balance paid in the following month.
(3) Operating expenses are paid in the month they are incurred.
(4) A minimum cash balance of $25,000 is required at the end of each month.
(5) Loans are used to maintain the minimum cash balance. At the end of each month, interest of 1% per month is paid on the outstanding loan balance as of the beginning of the month. Repayments are made whenever excess cash is available.
Prepare the company's cash budget for May. Show the ending loan balance at May 31.
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