Q2. The following information is budgeted for McCracken Plumbing Supply Company for next quarter, currently company is facing cash flow problems, to ease this issue management of the company collected following information for the preparation of cash budget.

AprilMayJune

Sales ...........................................................$110,000$130,000$180,000

Merchandise purchases ..............................$85,000$92,000$105,000

Selling and administrative expenses ..........$50,000$50,000$50,000

All sales at McCracken are on credit. 40% percent are collected in the month of sale,58% in the month following the sale, and the remaining 2% are uncollectible.

Merchandise purchases are 40% in month of purchase and 60% paid in the month following the month of purchase.

The selling and administrative expenses above include $8,000 of depreciation on display fixtures and warehouse equipment and 500 on account of bad debts. All other selling and administrative expenses are paid as incurred.

Company needs to pay 2,500 for tax in each month.

Trading license fee amounting to 500 payable in May.

McCracken wants to maintain a cash balance of $15,000. Any amount below this can be borrowed from a local bank as needed in increments of $1,000. All borrowings are made at month end.

Required:

Prepare McCracken's cash budget for the month of May. McCracken expects to have $24,000 of cash on hand at the beginning of May.