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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: a. Cash balance on June 1 is $736. b. Actual sales for April and May are as follows: c. 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. d. Inventory purchases average 64% 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. e. Salaries and wages total $11,750 per month, including a $4,500 salary paid to the owner. f. Rent is $4,100 per month. g. 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 all amounts to the nearest dollar.) 2. CONCEPTUAL CONNECTION Did the business show a negative cash balance for June? Suppose that the owner has no hope of establishing a line of credit for the business, what recommendations would you give the owner for dealing with a negative cash balance?

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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773
BuyFind

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773

Solutions

Chapter
Section
Chapter 9, Problem 61E
Textbook Problem

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:

  1. a. Cash balance on June 1 is $736.
  2. b. Actual sales for April and May are as follows:

Chapter 9, Problem 61E, Cash Budget The owner of a building supply company has requested a cash budget for June. After

  1. c. 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.

  2. d. Inventory purchases average 64% 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.
  3. e. Salaries and wages total $11,750 per month, including a $4,500 salary paid to the owner.
  4. f. Rent is $4,100 per month.
  5. g. 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. 1. Prepare a cash budget for June. Include supporting schedules for cash collections and cash payments. (Round all amounts to the nearest dollar.)
  2. 2. CONCEPTUAL CONNECTION Did the business show a negative cash balance for June? Suppose that the owner has no hope of establishing a line of credit for the business, what recommendations would you give the owner for dealing with a negative cash balance?

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Chapter 9 Solutions

Managerial Accounting: The Cornerstone of Business Decision-Making
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