Question 1 (10 marks)

The Mayne Lumber Co. sells lumber and building supplies to builders and the general

public. Actual sales for October and November were $18,000 and $25,000, respectively.

Projected sales are $30,000 for December, $15,000 for January, and $12,000 for February.

Sales terms call for a 2% discount for cash sales. Credit sales are due by the end of the

month after purchase. Experience suggests that 60% of the sales are for cash, 70% of the

credit sales will pay at the appropriate time, 20% of the credit sales will pay one month late,

and 10% of the credit sales are never paid.

Fifty percent (50%) of merchandise purchases are paid in the month of purchase and the

remainder is paid in the next month. Target ending inventories are 200 units plus 50% of

next month's unit sales.

The unit selling price is $10 and the unit purchase cost is $7.

Selling and administrative expenses total $4,000 per month and are paid in the month in

which they are incurred.

Finally, a partial trial balance on December 1, reveals a cash balance of $2,000, accounts

payable balance of $9,625 (reflecting the balance outstanding from November purchases),

and an inventory balance of $11,900.

Required:

Prepare the cash budget for the month of December in proper format.