Cash Budget

Myer Whittworth owns the local hardware store, Whittworths Hardware. Mr. Whittworth wants a cash budget showing expected cash receipts and disbursements for the month of September, and cash balance expected as of September 30, 20X5.

Planned cash balance, August 31, 20X5: $100,000

Customer receivables as of August 31: $530,000 total, $80,000 from July sales, $450,000 from August sales

Accounts Payable, August 31: $460,000

Merchandise purchases for September: $450,000, 40% paid in month of purchase, 60% paid in next month

Payrolls due in September: $90,000

Other expenses for September, payable in November: $7,500

Bank note due September 15: $90,000 plus $7,200 interest

Depreciation for September: $2,100

Three-year insurance policy due September 10 for renewal: $1,500, to be paid in cash

Sales for September: $1,000,000, half collected in month of sale, 40% in next month, 10% in third month

1) Prepare the cash budget for the month ending September 30, 20X5. Be sure to include a proper heading for Whittworths Hardware.

2) Analyze Whittworths Hardware cash budget created in 1). What are the A/R terms? What are the A/P terms? What impact do these terms have on the ending cash balance?