Case Study:

Question 3: Prepare a Cash Budget for July - October

DC's operates on a calendar year basis Credit Sales from Events and Catering are 20% per month Collections are 60% in the month of sale and 40% in the following month Admin & Selling includes $1,000 depreciation expense Prime (direct) wages are 30% of Sales Admin & Sales salaries are $4,350 per month Wages are paid 80% in current month and 20% the following month Purchases of Direct Materials, which are 32% of Sales, are paid 50% in current month and 50% in following month Loan payment of $1,600 is made at the 1st of each month A dividend to the owners of 10% of the ending quarter's Net Income is paid in Jan, Apr, Jul, Oct April - June Net Income before taxes was $50,000 Ending Inventory needs to be 30% of the following month's Direct Materials Cost of Goods Sold Accounts payable for purchases June 30 was $13,600 Beginning Cash Balance June 30 was $175,000 Effective tax rate is 23%. Quarterly estimated taxes are paid the month following the end of the quarter