Franco Carriage Company is preparing its budget for the coming year.Below is information about the 2 nd
Question:
Franco Carriage Company is preparing its budget for the coming year.Below is information about the 2nd quarter, which is not yet finished. The budgeted income statement for the 2nd quarter is:
Franco Carriage Company
Budgeted Income Statement
For the 2nd Quarter Ended 200x
April
May
June
July
Sales/Revenue
$20,000
$21,000
$25,000
$32,000
Cost of goods sold
12,000
14,000
15,500
21,000
Gross profit
8,000
7,000
9,500
11,000
Less:
Selling expenses
2,500
3,200
3,400
4,200
Administrative expenses
2,700
2,350
3,100
3,600
Total
5,200
5,550
6,500
7,800
Net income
$2,800
$1,450
$3,000
$3,200
The company has also completed the purchases budget, as follows:
Franco Carriage Company
Purchases Budget
For the 2nd Quarter Ended 200x
April
May
June
Budgeted cost of goods sold
$12,000
$14,000
$15,500
Plus desired ending inventory*
3,500
3,875
5,250
Total inventory needs
15,500
17,875
20,750
Less: beginning inventory
(2,500)
(3,500)
(3,875)
Budgeted purchases
$13,000
$14,375
$16,875
The company needs to prepare its budgeted cash receipts, budgeted cash payments for purchases, and monthly cash budget schedules for April, May and June.
The following additional information is available:
Budgeted Income statement for July 200x:
July
Sales
$ 32,000
Cost of goods sold
21,000
Gross profit
11,000
Less:
Selling expenses
4,200
Administrative expenses
3,600
Total
7,800
Net income
$ 3,200
1.73% of monthly sales are on account (i.e., for credit).The remainder is for cash.
2.Credit sales are collected as follows:
20% in the month of credit sales
55% in the month following the credit sales
The remainder in the 2nd month following the credit sales
3.Total budgeted sales for February are $15,000.
4.Total budgeted sales for March are $16,000.
5.The company assumes it would pay for budgeted purchases 50% in the month of purchase and 50% in the month following the purchase.
6.Budgeted purchases for March are $12,000.
7.For the months of April and May, the company must make a $5,500 payment for an outstanding bank note.
8.Franco Carriage must maintain a cash balance of at least $5,000 at the end of each month.
9.The budgeted cash balance at April 1 is $5,100.
10.When ending cash balances are less than $5,000, they make a short-term borrowing from their local bank.However, all borrowings must be made in multiples of $100.These short-term loans are repaid at the end of the year, which is December 31st.
Required
a.a monthly schedule of budgeted operating cash receipts for April, May, and June.
b. a monthly schedule of budgeted cash payments for purchases for April, May, and June.
c.a monthly cash budget for April, May, and June, including borrowings from the company's local bank as needed to maintain the minimum cash balance.
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