Date: May 2, Year 7

To: Melissa Shaw, Accountant II

From: Robert Widerman, Accounting Manager

Re: Cash budgets and forecasts

Hi Melissa,

Please update the cash portion of the revised budget for May and June. The budget includes a cash collections forecast, a cash payments forecast, and an estimate of the cash balance for the balance sheet. These will also be used in the cash flow statement.

In the past, 70% of credit sales are collected in the month of sale, 20% the month after the sale, and 9% the second month following the sale. The remainder is usually not collected and is written off through the allowance for uncollectible accounts.

May and June purchases are forecasted to be $54,000 and $70,000, respectively. Payments are made at the time of purchase to obtain a 2% discount. We also expect other cash payments of $14,400 in May and $15,100 in June.

May and June sales are forecasted to be $66,000 and $72,000, respectively.

Thanks,

Robert

Babbits Rabbits

Bank Reconciliation

April Year 7

Bank balance per statement

$23,053.96

Difference

(1,053.96)

Bank balance per accounts (cashbook)

22,000.00

Reconciling items

(1,053.96)

Babbits Rabbits

Schedule of Sales and Purchases

January - April, Year 7

Month

Sales

Purchases

Jan.

$72,000

$42,000

Feb.

$66,000

$48,000

Mar.

$60,000

$36,000

Apr.

$78,000

$54,000

Total to Date

$276,000

$180,000

Complete Babbit's Rabbits' forecasted cash balances for the months of May and June. Enter the appropriate amounts in the associated cells. Enter cash inflows as positive numbers; enter cash outflows as negative numbers using a leading minus (-) sign.

	May	June
1. Beginning cash balance
2. Inflows
3. Outflows
4. Ending cash balance