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Prepare the cash budget for the months of april may and june The following actual and budgeted sales relate to AgriTech Company, a distributor of
Prepare the cash budget for the months of april may and june
The following actual and budgeted sales relate to AgriTech Company, a distributor of agricultural products located somewhere in the Midwest. March (actual).... April May. June.. July............................. $50,000 60,000 72,000 90,000 48,000 The company's top executives intend to have 25% of sales as gross margin. Sales are 60% for cash and 40% on credit. Credit sales are collected in the month following sale. The company's inventory manager informs that each month's ending inventory should equal 80% of the following month's budgeted cost of goods sold. One-half of a month's inventory purchases is paid for in the month of purchase; the other half is paid for in the following month. In addition, the following relevant information is also provided. a. Monthly expenses are as follows: commissions, 12% of sales; rent, $2,500 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $900 per month (includes depreciation on new assets). b. Equipment costing $1,500 will be purchased for cash in April. c. The company must maintain a minimum cash balance of $4,000. An open line of credit is available at a local bank. All borrowing is done at the beginning of a month, and all repayments are made at the end of a month. The monthly interest rate is 1%. Interest must be paid at the end of each month based on the total loans outstanding for that month. A snapshot from AgriTech Company's balance sheet as of March 31 is as follows: Cash............................. Accounts receivable....... Inventory Building and equipment, net Accounts payable Common shares ......... Retained earnings... $ 8.000 20,000 36.000 120,000 21,750 150,000 12,250 The accounts receivable at March 31 are a result of March credit sales. The accounts payable at March 31 are the result of March purchases of inventoryStep by Step Solution
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