DEMONSTRATION CASE B: CASH BUDGET Assume that Sky High Parachute Company's budgeted income statement is as follows: Quarter 1 $40,000,000 15,600,000 24,400,000 Quarter 2 $35,000,000 13,650,000 21,350,000 Quarter 3 $45,000,000 17,550,000 27,450,000 Quarter 4 $50,000,000 19,500,000 30,500,000 Budgeted sales revenue Budgeted cost of goods sold Budgeted gross margin Budgeted selling and administrative expenses Budgeted net operating income 4,500,000 4,000,000 5,000,000 5,500,000 $19,900,000 $17,350,000 $22,450,000 $25.000.000 Budgeted sales revenue is collected as follows: 60 percent of sales revenue is collected in cash. The remainder of sales is on credit and is collected as follows: . During the quarter of sale, 35 percent. During the quarter following the sale, 60 percent. Uncollected, 5 percent. Cost of goods sold (manufacturing costs) consists of the following: Materials purchases represent 70 percent of cost of goods sold. The company pays for 40 per- cent of materials during the quarter of purchase and the remainder the next quarter. The remaining 30 percent of cost of goods sold is made up of direct labor and manufacturing overhead including $400,000 in depreciation (a noncash expense). All of the cash payments for direct labor and overhead are paid during the quarter incurred. Selling and administrative expenses are paid in the quarter after they are incurred. Required: Prepare the following schedules for quarters 2, 3, and 4. (You do not have enough information to prepare the cash budget for quarter 1, so assume its ending cash balance is $500,000.) 1. Cash receipts. 2. Cash payments. 3. Cash budget