Cash

budgetlong dashBasic

Grenoble Enterprises had sales of

$ 50 comma 300$50,300

in March and

$ 60 comma 400$60,400

in April. Forecast sales for May, June, and July are

$ 70 comma 200$70,200,

$ 79 comma 900$79,900,

and

$ 100 comma 300$100,300,

respectively. The firm has a cash balance of

$ 5 comma 100$5,100

on May 1 and wishes to maintain a minimum cash balance of

$ 5 comma 100$5,100.

Given the following data, prepare and interpret a cash budget for the months of May, June, and July.

(1) The firm makes

19 %19%

of sales for cash,

61 %61%

are collected in the next month, and the remaining

20 %20%

are collected in the second month following sale.

(2) The firm receives other income of

$ 1 comma 500$1,500

per month.

(3) The firm's actual or expected purchases, all made for cash, are

$ 49 comma 700$49,700,

$ 70 comma 300$70,300,

and

$ 80 comma 000$80,000

for the months of May through July, respectively.

(4) Rent is

$ 3 comma 200$3,200

per month.

(5) Wages and salaries are

12 %12%

of the previous month's sales.

(6) Cash dividends of

$ 2 comma 700$2,700

will be paid in June.

(7) Payment of principal and interest of

$ 4 comma 000$4,000

is due in June.

(8) A cash purchase of equipment costing

$ 5 comma 800$5,800

is scheduled in July.

(9) Taxes of

$ 5 comma 500$5,500

are due in June.