In preparation for the quarterly cash budget, the following revenue and cost information have been

compiled. You are required to prepare and evaluate a cash budget for the months of October, November,

and December based on the information shown below:

Month Sales Purchases

August (actual) $3,000,000 $3,500,000

September (actual) $4,500,000 $2,000,000

October (forecast) $1,000,000 $ 500,000

November (forecast) $1,500,000 $ 750,000

December (forecast) $2,000,000 $1,000,000

1 The firm collects 60 percent of sales for cash and 40 percent of its sales one month later.

2 Interest income of $50,000 on marketable securities will be received in December.

3 The firm pays cash for 40 percent of its purchases.

4 The firm pays for 60 percent of its purchases the following month.

5 Salaries and wages amount to 15 percent of the preceding months sales.

6Sales commissions amount to 2 percent of the preceding months sales.

7 Lease payments of $100,000 must be made each month.

8 A principal and interest payment on an outstanding loan is due in December of $150,000.

9 The firm pays dividends of $50,000 at the end of the quarter.

10 Fixed assets costing $600,000 will be purchased in December.

11Depreciation expense each month of $45,000.

12The firm has a beginning cash balance in October of $100,000 and maintains a minimum cash balance of $200,000.