Question (1) Cash Budget

The CFO Jonas Rothman has the following monthly actual and budgeted sales revenue for 20x1:

Edmonton Manufacturing Company (EMC)

Budgeted Sales Revenue

March (actual) 30,000

April (actual) 42,000

May (budgeted) 28,000

June (budgeted) 15,000

Jonas is preparing a cash budget for the month May. The following information can be used to prepare the budget:

a-The sales are all on credit. 60% of credit sales are collected the month after the sale. 36% of credit sales in the month are collected two months after the month of sale. 4% of sales is uncollectable.

b-The cost of goods sold are 60% of sales.

c-The purchases are made in the month before the month of sale. The purchases are paid in the following month (or in the month the sale is made).

d-General and administrative expenses are $10,000 per month. Depreciation of $1,500 per month is included in the $10,000 general and administrative expenses.

e-The company is scheduled to pay $20,000 for new office equipment in May.

f-The company does not owe anything to the bank on May 1st. The interest rate is 6%. The company borrows and repays its debt in increments of $1,000. The company borrows the money at the beginning of the month and repays its debts at the end of the month. Interest is paid at the end of the month based on the outstanding balance owing for the month times 1/12 times the interest negotiated. The minimum cash balance the company budgets for is $5,000.

g-The company will pay taxes of $3,000 in May.

h-The cash balance on April 30th is $9,000.

Required:

Prepare a cash budget for the month of May, 20x1.