Problem 9-50

The controller of Feinberg Company is gathering data to prepare the cash budget for July. He

plans to develop the budget from the following info:

A. Of all sales, 40 percent are cash sales

B. Of credit sales, 45% are collected within the month of sale. Half of the credit sales are

collected within the month receive a 2% cash discount (for accounts paid within 10

days). 30% of credit sales are collected in the following month; remaining credit sales

are collected the month thereafter. There are virtually no bad debts.

C. Sals for the second two quarters of the year follow. (Note: the first 3 months are actual

sales, and the last three months are estimated sales.

Sales ($)

April

$450,000

May

580,000

June

900,000

July

1,140,000

August

1,200,000

September

1,134,000

D. The company sells all that it produces each month. The cost of raw materials equals

26% of each sales dollar. The company requires a month ending inventory of raw

materials equal to the coming months production requirements. Of raw materials

purchases, 50% is paid for in the following month.

E. Wages total $105,000/month and are paid in the month incurred.

F. Budgeted monthly operating expenses total $376,000 of which $45,000 is depreciation

and $6,000is expiration of prepaid insurance (the annual premium of $72,000 is paid on

January 1).

G. Dividends of $130,000, declared on June 30 will be paid on July 15.

H. Old equipment will be sold for $25,200 on July 4

I.

On July 13, new equipment will be purchased. For $173,000

J. The company maintains a minimum cash balance of $20,000

K. The cash balance on July 1 is $27,000

Required: Prepare a cash budjet for July. Give a supporting schedule that details the cash

collections from sales.