The owner of a small mining supply company has requested a cash budget for June. After examining the records of the company, you find the following:

Cash balance on June I is $736.

Actual sales for April and May are as follows:

April May

Cash sales $10,000 $18,000

Credit sales 28,900 35,000

Total sales $38,900 $53,000

Credit sales are collected over a three-month period: 40 percent in the month of sale, 30 percent in the second month, and 20 percent in the third month. The sales collected in the third month are subject to a 2 percent late fee, which is paid by those customers in addition to what they owe. The remaining sales are uncollectible.

Inventory purchases average 64 percent of a month's total sales. Of those purchases, 20 percent are paid for in the month of purchase. The remaining 80 percent are paid for in the following month.

Salaries and wages total $11,750 per month, including a $4,500 salary paid to the owner.

Rent is $4,100 per month.

Taxes to be paid in June are $6,780.

The owner also tells you that he expects cash sales of $18,600 and credit sales of $54,000 for June. No minimum cash balance is required. The owner of the company does not have access to short term loans.

REQUIRED:

suggest a cash budget for June. Include supporting schedules for cash collections and cash payments.

*If you can please provide a detailed explanation. I have a test tomorrow, and my teacher will ask a question similar to this, so if you can please explain it, i will be forever grateful. Thank you.