Cash dividends for the store of $710 thousand are declared during the third month of each quarter and are paid during the first month of the following quarter. Operating expenses, except insurance, rent, and depreciation are paid as incurred. The prepaid insurance is for five more months. Cost of goods sold is equal to 60% of sales. Ending inventories are sufficient for 150% of the next month's cost of sales. Purchases during any given month are paid in full during the following month. Cash sales account for 50% of the revenue. Of the credit sales, 60% are collected in the next month and 40% are collected in the month after. Money can be borrowed and repaid in multiples of $100 thousand at an interest rate of 12% per year. The company desires a minimum cash balance of $2 million on the first of each month. At the time the principal is repaid, interest is paid on the portion of principal that is repaid. All borrowing is at the beginning of the month, and all repayment is at the end of the month. Money is never repaid at the end of the month it is borrowed. Part A Part B Part 0 Part D Part E Part F (d) Prepare a cash budget for each month of the second quarter ending June 30. Include budgeted borrowings and repayments Only use negative signs, if needed, for: excess receipts over disbursements, balance before borrowings and cash balances (beginning and ending). NORDSTROMS Monthly Cash Budget (in thousands) Quarter Ending June 30 April May June Total Cash balance, beginning $ Ox $ 0 x $ Ox $ OX Receipts 0X 0 x OX 0 X Disbursements OX OX 0x OX Excess receipts over disb. OX OX 0x 0 x Balance before borrowings 0 x OX OX OX Borrowings OX 0 0 0 x Loan repayments 0 0 X 0x 0 X Cash balance, ending $ 0 x $ 0 x $ Ox $ 0 x Developing a Master Budget for a Merchandising Organization Assume Nordstrom prepares budgets quarterly. The following information is available for use in planning the second quarter budgets for one of its stores (in thousands). NORDSTROM Balance Sheet March 31 Assets Liabilities and Stockholders' Equity Cash $2,525 Merchandise purchases payable $2,400 Accounts receivable 2,040 Dividends payable 710 Inventory Stockholders' equity 8,005 Prepaid Insurance 150 Fixtures 3,000 Total assets $11,115 Total liabilities and equity $11,115 3,400 Actual and forecasted sales for selected months in the upcoming year are as follows: Month (in thousands) Sales Revenue January $2,600 February 2,700 March 3,000 April 3,600 May June 3,500 July 3,200 August 4,000 3,800 Monthly operating expenses are as follows: Wages and salaries $750 Depreciation 75 Advertising 55 Other costs 350 Part A Part B Part C Part D Part E Part F (d) Prepare a cash budget for each month of the second quarter ending June 30. Include budgeted borrowings and repayments Only use negative signs, if needed, for: excess receipts over disbursements, balance before borrowings and cash balances (beginning and ending). NORDSTROMS Monthly Cash Budget (in thousands) Quarter Ending June 30 April May June Total Cash balance, beginning $ 0 x $ 0 x $ 0 x $ OX Receipts OX OX 0 x Disbursements 0 x 0 X 0 x 0 X Excess receipts over disb. OX 0 X 0 x 0 x Balance before borrowings OX 0 X 0 x OX Borrowings 0 x 0 0 0 X Loan repayments 0 OX 0 x 0 X Cash balance, ending $ 0 x $ 0 x $ 0X $ 0 x
