Cash

budgetlong dashBasic

Grenoble Enterprises had sales of

$ 50 comma 400$50,400

in March and

$ 60 comma 100$60,100

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

$ 70 comma 000$70,000,

$ 79 comma 800$79,800,

and

$ 99 comma 900$99,900,

respectively. The firm has a cash balance of

$ 5 comma 000$5,000

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

$ 5 comma 000$5,000.

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

(1) The firm makes

15 %15%

of sales for cash,

64 %64%

are collected in the next month, and the remaining

21 %21%

are collected in the second month following sale.

(2) The firm receives other income of

$ 1 comma 600$1,600

per month.

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

$ 49 comma 500$49,500,

$ 69 comma 700$69,700,

and

$ 80 comma 400$80,400

for the months of May through July, respectively.

(4) Rent is

$ 3 comma 400$3,400

per month.

(5) Wages and salaries are

10 %10%

of the previous month's sales.

(6) Cash dividends of

$ 3 comma 500$3,500

will be paid in June.

(7) Payment of principal and interest of

$ 4 comma 100$4,100

is due in June.

(8) A cash purchase of equipment costing

$ 6 comma 400$6,400

is scheduled in July.

(9) Taxes of

$ 6 comma 200$6,200

are due in June.