Question
FIXED & FLEXIBLE BUDGETS; VARIANCE ANALYSIS Frank's Furniture is preparing a Cash Budget for the second quarter of the coming year. Management would like to
FIXED & FLEXIBLE BUDGETS; VARIANCE ANALYSIS
Frank's Furniture is preparing a Cash Budget for the second quarter of the coming year. Management would like to give you additional exposure to budgeting during your internship and has assigned you the task of preparing this Cash Budget. You will present this to your accounting supervisor for review.
The following data has been forecasted:
April | May | |
Sales | $150,000 | $157,000 |
Merchandise Purchases | 107,000 | 112,400 |
Operating Expenses | ||
Payroll | 13,600 | 14,280 |
Advertising | 5,400 | 5,700 |
Rent | 2,500 | 2,500 |
Depreciation | 7,500 | 7,500 |
End of April balances | ||
Bank loan payable | 26,000 |
Additional data:
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Sales are 40% cash and 60% credit. The collection pattern for credit sales is 50% in the month following the sale and 50% in the month thereafter. Total sales in March were $125,000.
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Purchases are all on credit, with 40% paid in the month of purchase; the balance is paid in the following month.
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Operating expenses are paid in the month they are incurred.
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A minimum cash balance of $25,000 is required at the end of each month.
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Loans are used to maintain the minimum cash balance. At the end of each month;
interest of 1% per month is paid on the outstanding loan balance as of the beginning of the month. Repayments are made whenever excess cash is available.
Required:
1. Prepare the companys cash budget for May on the next page. Show the ending loan balance at May 1.
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Frank's Furniture | ||
Cash Budget | ||
For the month of May | ||
Beginning cash balance | $ | |
Cash reciepts from sales | ||
Total | $ | |
Cash Disbursements | ||
Payments for merchandise | $ - | |
Payroll | ||
Advertising | ||
Rent | ||
Interest | ||
Total cash disbursements | $ - | |
Preliminary cash balance | ||
Loan repayment | ||
Cash balance, ending | ||
Loan balance, end of the month | $ - | |
(A) Cash Collections | |
May cash sales | |
50% of April credit sales | |
50% of March credit sales | |
Total cash collections from customers | $ - |
(B) Cash Payments | |
40% of May purchases | |
60% of April purchases | |
Total cash payments for purchases | $ - |
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