Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The following information is available to assist in preparing a cash budget. Budgeted income statements for July through October 2017 as follows: July August September

The following information is available to assist in preparing a cash budget. Budgeted income statements for July through October 2017 as follows:

July August September October

Sales $22,000 $28,000 $32,000 $40,000

cost of goods sold (11,000) (15,000) (17,000) (21,000)

gross profit 11,000 13,000 15,000 19,000

less other expenses

selling 3,300 4,000 4,400 5,200

administrative 3,600 5,000 4,200 4,600

total (6,900) (9,000) (8,600) (9,800)

net income $4,100 $4,000 $6,400 $9,200

additional information:

  1. other expenses which are paid monthly, include $2,000 of depreciation per month.
  2. sales are 40% for cash and 60% on credit
  3. credit sales are collected 25% in the month of the sale, 65% one month after sale, and 10% two months after sale. May sales were $16,000 and June sales were $17,000.
  4. merchandise is paid for 50% in the month of purchase, the remaining 50% is paid in the following month. Accounts payable for merchandise at June 30 is $7,000.
  5. the company maintains its ending inventory levels at 20% of the cost of goods to be sold in the following month. The inventory at June 30 is $2,200
  6. an equipment note of $6,000 per month is being paid through August
  7. the company must maintain a cash balance of at least $6,000 at the end of each month. The cash balance on June 30 is $6,100.
  8. the company can borrow from its bank as needed. Borrowing and repayments must be in multiples of $100. All borrowings take place at the beginning of a month, and all repayments are made at the end of a month. When the principal is repaid, interest on the repayment is also paid. The interest rate is 12 % per year.

Required:

a. show a monthly schedule of budgeted operating cash receipts for July, August and September.

b. show a monthly purchases budget and a schedule of budgeted cash payments for purchases for July, August and September.

c. show a monthly cash budget for July, August and September. Show borrowings from the company's bank and repayments to the bank as needed to maintain the minimum cash balance.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting Principles

Authors: Jerry J Weygandt

10th Edition

1118009282, 9781118009284

More Books

Students also viewed these Accounting questions

Question

Which ratios provide information on performance for investors?

Answered: 1 week ago

Question

How many moles of water are there in 1.000 L? How many molecules?

Answered: 1 week ago

Question

What is the cerebrum?

Answered: 1 week ago

Question

2. What do the others in the network want to achieve?

Answered: 1 week ago

Question

1. What do I want to achieve?

Answered: 1 week ago