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Cash Budget

LeeAnn Ortiz owns a retail store that sells new and used sporting equipment. LeeAnn has requested a cash budget for October. After examining the records of the company, you find the following:

1. Cash balance on October 1 is $980.
2. Actual sales for August and September are as follows:

		August		September
Cash sales		$6,000		$4,800
Credit sales		60,000		62,000
Total sales		$66,000		$66,800

1. Credit sales are collected over a three-month period: 45 percent in the month of sale, 36 percent in the next month, and 16 percent in the second month after the sale. The remaining sales are uncollectible.
2. Inventory purchases average 70 percent of a month's total sales. Of those purchases, 40 percent are paid for in the month of purchase. The remaining 60 percent are paid for in the following month.
3. Salaries and wages total $4,000 per month.
4. Rent is $3,150 per month.
5. Taxes to be paid in October are $1,635.
6. LeeAnn usually withdraws $3,500 each month as her salary.
7. Advertising is $1,500 per month.
8. Other operating expenses total $3,700 per month.
9. Internet and telephone fees are $320 per month.

LeeAnn tells you that she expects cash sales of $5,200 and credit sales of $63,000 for October. She likes to have $3,000 on hand at the end of the month and is concerned about the potential October ending balance.

Required:

Question Content Area

Prepare a cash budget for October. Include supporting schedules for cash collections and cash payments. Round your intermediate computations and final answers to the nearest dollar.

Beginning cash balance	$fill in the blank b5eb6cfeb07ffe6_1
Collections:
Cash sales	fill in the blank b5eb6cfeb07ffe6_2
Credit sales:
October	fill in the blank b5eb6cfeb07ffe6_3
September	fill in the blank b5eb6cfeb07ffe6_4
August	fill in the blank b5eb6cfeb07ffe6_5
Total cash available		$fill in the blank b5eb6cfeb07ffe6_6
Disbursements:
Inventory purchases:
October	$fill in the blank b5eb6cfeb07ffe6_7
September	fill in the blank b5eb6cfeb07ffe6_8
Salaries and wages	fill in the blank b5eb6cfeb07ffe6_9
Rent	fill in the blank b5eb6cfeb07ffe6_10
Taxes	fill in the blank b5eb6cfeb07ffe6_11
Other operating expenses	fill in the blank b5eb6cfeb07ffe6_12
Owner withdrawal	fill in the blank b5eb6cfeb07ffe6_13
Advertising	fill in the blank b5eb6cfeb07ffe6_14
Internet and telephone	fill in the blank b5eb6cfeb07ffe6_15	fill in the blank b5eb6cfeb07ffe6_16
Ending cash balance		$fill in the blank b5eb6cfeb07ffe6_17

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Explain how each of the four data analytic typesdescriptive, diagnostic, predictive, or prescriptivecan be used in LeeAnn's budgeting process. (See Exhibits 2.5 and 2.6, pp. 37, 40, for a review of data analytic types.)

The cash budget is used both___________ to describe what is expected given LeeAnn's assumptions.