As a financial intern for Reilly, Inc., you have been given the task of constructing a cash budget for the months of July, August, and September. You have gathered the information shown below.

SALES: (Actual sales for May and June; Forecasted sales for July - October)

May 73,100

June 75,200

July 80,000

August 75,000

September 72,000

October 70,000

COLLECTION OF SALES

• Cash sales are estimated to be 10.0% of sales.
• Of total sales, 80.0% are collected in the month following the sale
• The remaining 10.0% are collected in the second month following the sale. There are no bad debts.

PURCHASES

• The cost of materials are 40% of sales.
• The firm has a policy of purchasing enough inventory each month to cover the next months expected sales.
• Of the firms total purchases, 25% are paid for in cash. Another 65% are paid one month following the purchase. The remainder are paid for two months after the purchase.

EXPENSES (per month, unless otherwise noted)

Rent	$1,000
Wages and Salaries	5,200
Lease Payments	900
Capital purchases	75,000
Month of purchase	August
Property Taxes	1,800
Month of tax payment	September
Depreciation	950
Other Expenses (%)	9% of sales

FURTHER ASSUMPTIONS:

On July 1^st, the firm has a cash balance of $3,000.

The loan balance on July 1^st is $6,000.

The minimum cash balance is set at $3,000.

Interest is paid each month. The interest to be paid is the interest due on the previous months loan balance. The interest rate is 6.0% per year.

The firms safety stock is kept at $40,000.

Long-term debt and common stock outstanding are not expected to change during the period.

INCOME STATEMENT For the most recent 12 Months Sales Cost of Materials Gross Profit $889,800 355.920 533,880 Less Expenses: Rent Wages and Salaries Lease Payments Interest Depreciation Property Taxes Other Expenses Total Expenses 12,000 62,400 10,800 4,320 11,400 1,800 80,082 182.802 Net Income 351,078 (Note: This problem ignores income taxes.) Cash Accounts Receivable Inventory Gross Fixes Assets Accumulated Depreciation TOTAL ASSETS 3,000 74,990 72,000 657,900 223.686 584,204 BALANCE SHEET As of the end of June Notes Payable Accounts Payable Long term Debt Common Stock Retained Earnings TOTAL LIABILITES & OWNER'S EQUITY 6,000 27,008 263,160 73,000 215.036 584,204 May | 73,100 7,310 June 75,200 7,520 July 80,000 8,000 August 75,000 7500 September 72,000 7,200 Oct/Nov 70,000 58,480 | 60,160 7,310 75,470 64,000 7,520 79020 60000 8000 75,200 57,600 7,500/7,200 30,080 32,000 30,000 28,800 28,000 7,520 Cash Budget Sales Cash Sales Collections: One month lag Two months lag Total cash receipts Cash Disbursements Purchases Payments: Cash purchase Lagged one month Lagged two months Rent Wages and salaries Lease payments Interest Capital purcheses Property taxes Other Expenses Total Cash Disburesements 8,000 19,552 18,200 2,880/,800 7,500 20,800 3,008 1,000 5,200 900 0 7200 19500 3,200 1,000 5,200 900 7,000 18720 3000 1,000 5,200 900 79 0 0 75,000 0 0 7,200 45,638 6,750 118750 1,800 6,480 44179 ** Financial transactions; Total cash receipts Need to complete But no points. 3,000 32,832 3,000 26,832 (12,898) 3,000 3,000 34,021 3,000 Less Disbursements NET CASH FLOWS Add: beginning cash Ending cash balance Less: minimum cash balance Required total financing Excess cash balance Borrowing needed this month Repayment on loan this month Total loan balance Ending cash balance 29,832 0 6,000 T O 26,832 Complete the Income statement | _/5 points Sales Cost of materials Gross Profit Rent Wages and Salaries Lease payments Interest Depreciation Property Taxes Other expenses Net Income PRO FORMA BALANCE SHEET End of September Complete the Balance Sheet _/6 points Cash Accounts Receivables Inventory Fixed Assets Less:Accumulated Depreciation Total Assets Notes Payable Accounts Payable Long Term Debt Common Stock Retained Earnings. Total liabilites and Equity