25. Cruises, Inc. has budgeted sales revenues as follows:

June July August

Credit sales $135,000 $125,000 $ 90,000

Cash sales 90,000 255,000 195,000

Total sales $225,000 $380,000 $285,000

Past experience indicates that 60% of the credit sales will be collected in the month of sale and the remaining 40% will be collected in the following month. Purchases of inventory are all on credit and 50% is paid in the month of purchase and 50% in the month following purchase. Budgeted inventory purchases are:

June $300,000

July 240,000

August 105,000

Other cash disbursements budgeted: (a) selling and administrative expenses of $48,000 each month, (b) dividends of $103,000 will be paid in July, and (c) purchase of equipment in August for $30,000 cash. The company wishes to maintain a minimum cash balance of $50,000 at the end of each month. The company borrows money from the bank at 6% interest if necessary to maintain the minimum cash balance. Borrowed money is repaid in months when there is an excess cash balance. The beginning cash balance on July 1 was $50,000. Assume that borrowed money in this case is for one month.

Instructions

Prepare a cash budget for the months of July and August.

Cash Budget

For the Two Months of July and August

July August

Beginning cash balance

Add: Receipts

Collections from customers

Cash sales

Total receipts

Total available cash

Less: Disbursements

Purchases

Selling and administrative expenses

Dividends

Equipment purchase

Total disbursements

Excess (deficiency) of available cash over disbursements

Financing

Borrowings

Repayments

Ending cash balance