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Toyota company has budgeted sales revenues as follows: Past experience indicates that 65% of the credit sales will be collected in the month of sale,
Toyota company has budgeted sales revenues as follows: Past experience indicates that 65% of the credit sales will be collected in the month of sale, 25 % will be collected in the first month following the sale and the remaining 10% will be collected in the following month. Purchases of inventory are all on credit and 30% are paid in the month of purchase and 70% in the month following purchase. Budgeted inventory purchases are: Other cash disbursements budgeted: (a)selling and administrative expenses of $45,000 each month, (b) dividends of $80,000 will be paid in Mareh, and (c) purchase of investments in April for $25,000 cash. The company wishes to maintain a minimum cash balance of $60,000 at the end of each month. The company borrows money from the bank at 7% interest if necessary ! to maintain the minimum cash balance. Borrowed money is repaid in months when there is an excess cash balance. The beginning cash balance on Mareh l was $60,000. Assume that borrowed money in this case is for one month (ignore interest). Instructions Prepare separate schedules for expected collections from customers and expected payments for purchases of inventory. Prepare a cash budget for the months of Mareh and April
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