The company is planning its cash needsfor the third quarter in 2012. IThe following information has been assembled toassist in preparing a cash budget for the quarter July through October 2012
|
July
|
August
|
September
|
October
|
|
Sales
|
$18,000
|
$24,000
|
$28,000
|
$36,000
|
|
Cost of goods sold
|
($10,000)
|
($14,000)
|
($16,000)
|
($20,000)
|
|
Gross profit
|
$8,000
|
$10,000
|
$12,000
|
$16,000
|
|
Less other expenses
|
|
|
|
|
|
Selling
|
$2,300
|
$3,000
|
$3,400
|
$4,200
|
|
Administrative
|
$2,600
|
$3,000
|
$3,200
|
$3,600
|
|
Total
|
($4,900)
|
($6,000)
|
($6,600)
|
($7,800)
|
|
Net income
|
$3,100
|
$4,000
|
$5,400
|
$8,200
|
Additional information follows:
1. Other expenses which arepaid monthly include $1,000 of depreciation per month
2. Sales are 30% for cash and70% on credits
3. Credit sales are collected20% in the month of sale, 70% one month after sale and 10% two months aftersale. May sales were $15,000 and June sales were $16,000
4. Merchandise is paid for 50%in the month of purchase, the remaining 50% is paid in the following month.Accounts payable for merchandise at June 30 totaled $6,000
5. The company maintains itsending inventory levels at 25% of the cost of goods to be sold in the followingmonth. The inventory at June 30 is $2,500
6. An equipment note of $5,000per month is being paid through August
7. The company must maintain acash balance of at least $5,000 at the end of each month. The cash balance atJune 30 is $5,100
8. The company can borrow froma bank as needed. Borrowings and repayments must be in multiples of $100. All borrowingstake place at the beginning of a month, and all repayments are made at the endof a month. When the principal is repaid, interest on the repayment is alsopaid. The interest rate is 12 percent per year.
Required:
a) Prepare a monthly schedule of budgeted operating cash receipts for July, August and September.
b) Prepare a monthly purchases budget and schedule of budgeted cash payments for purchases for July, August and September
c) Prepare a monthly cash budget for July, August and September. Show borrowings from the company's bankand repayment to the bank as needed to maintain the minimum cash balance
Prepare a comprehensive cash budget by using the template as a guide