Question
Hannah Louisa, the sole owner of Hannahs Hair Fashions has prepared a budgeted profit and loss statement for the month of May. She has asked
Hannah Louisa, the sole owner of Hannahs Hair Fashions has prepared a budgeted profit and loss statement for the month of May. She has asked you to prepare a Cash Budget for the business for May so that she can determine how much cash she can withdraw during May and still maintain her desired minimum monthly cash balance of $600. She provides you with the following additional information about the business. The business pays for 70% of its purchases in the month of purchase and 30% in the month following the purchase. Sixty per cent of all sales are collected in the month of sale and 40% the following month.
The annual insurance premium was prepaid in January and the quarterly rates are to be paid in May $270. All other cash expenses are paid in the current month. The cash at bank balance at 1 May was $775. A new piece of hair styling equipment costing $180 will be paid for in May.
Additional information is as follows:
April sales $1,760
April purchases 1020
May purchases 1320
HANNAHS HAIR FASHIONS
Budgeted Profit and Loss Statement
For the month of May
Sales revenue $2200
Cost of goods sold 990
Gross profit 1210
Operating expenses:
Insurance expense 75
Rent expense 150
Wages expense 550
Rates expense 90
Depreciation expense 50
915
Net profit $295
Required:
- Prepare a cash budget for the month of May.
- How much cash can the owner of Hannahs Hair Fashions withdraw during May and still maintain the minimum cash balance required? It may occur that she needs to contribute cash to maintain the required minimum cash balance.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started