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Purchases are paid for as follows: 50% in the month of purchase and the remaining 50% in the following month. All sales are on credit. 20% of a month's sales are collected in the month of sale. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible.

You have just been hired to work for a company that sells whimsical coffee mugs, Spot's Spot, Inc. The company has an exclusive franchise on the distribution of the coffee mugs, and sales have grown so rapidly over the last few years that it has become necessary to add new members to the management team. You have been given responsibility for all planning and budgeting. Your first assignment is to prepare a master budget for the next three months, starting April 1. You are anxious as follows The coffee mugs are sold to retailers for $20 each. Recent and forecasted sales in units are January (actual) $ February (acutal) $ March (acutal)$ April (budget) S May (budget) $ June (budget) $ July (Budget) August (budget) $ Sept (budget) S 23,200 29,200 43,200 68,200 103,200 53,200 33,200 31,200 28,200 The large buildup in sales is due to Mother's and Father's Day, your biggest holidays of the year. Purchases are paid for as follows: 50% in the month of purchase and the remaining 50% in the following month. All sales are on credit. 20% of a month's sales are collected in the month of sale. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible. The company's monthly selling and administrative expenses are given below Variable Sales Comissions 4% of sales Fixed: Advertising Rent S Salaries $ Utilities S 360,000 34,000 138,000 15,000 4,600 30,000 Insurance Depreciation $ Insurance is paid on an annual basis, in November of every year. ***THINK PRE-PAID*** All selling and administrative expenses are paid during the month, in cash, with the exception of depreciation and insurance expired. Equipment will be purchased during May for $24,000 cash, additional equipment will be purchased in June for $56,000 cash. The company declares dividends of $27,000 each quarter, payable in the first month of the following quarter. The company's balance sheet at March 31 is given below Assets 90,000 749,600 152,768 29,000 110,000 2,131,368 Cash AR (58,400 Feb Sales; 691,200 March Sales Inventory Prepaid Insurance Property and equipment (net) Total Assets S S $ S S Liabilities and Stockholders' Equity AP Dividends Payable Common Stock Retained Earnings Total liabilities and stockholders' equity S 116,000 27,000 1,120,000 868,368 2,131,368 S The company has an agreement with a bank that allows it to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month, and for simplicity, we will assume that interest is not compounded. At the end of the quarter, the company would pay the bank all of the accumulated interest on the loan and as much of the loan as possible (in increments of S1,000), while still retaining at least $66,000 in cash A cash budget. Show the budget by month and in total. Some expenses do NOT apply to a cash budget (Cash deficiency, repayments and interest should be indicated by a minus sign.) Spot's Spot, Inc Cash Budget For the Three Months Ending June 30 April May June Quarter Cash balance, beginning Add: receipts from customers Total cash available ? ? 7 7 7 7 7 Less cash disbursements: Merchandise Purchases Sales commisei Salaries and wages 2 ? ? ? ? 2 Utilities 2 surance Advertising Insur 2 2 Rent Dividends paid Land purchases Equipment purchases Depreciation Total cash disbursements 2 2 2 2 Excess (deficiency) of cash available over disbursements Financing: Borrowings Repayments ? 7 Interest Total financing Ending cash balance