Question

Cash Budget The owner of a building supply company has requested a cash budget for June. After examining the records of the company, you find the following: a. Cash balance on June 1 is $1,086. b. 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 C. Credit sales are collected over a 3-month period: 40% in the month of sale, 30% in the second month, and 20% in the third month. The sales collected in the third month are subject to a 2% late fee, which is paid by those customers in addition to what they owe. The remaining sales are uncollectible. d. Inventory purchases average 64% of a month's total sales. Of those purchases, 20% are paid for in the month of purchase. The remaining 80% are paid for in the following month. e. Salaries and wages total $11,750 per month, including a $4,500 salary paid to the owner. f. Rent is $4,400 per month. g. 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 doesn't have access to short-term loans.

Answer 1

	Cash Budget
	For June
	Perticulars	Workings	Amount
a	Beginning cash balance	Given	1,086
b	Collections :
	cash sales	Given	18,600
c	credit sales :
	current month	54000*40%	21,600
	may credit sales	35000*30%	10,500
	april credit sales	28900*20%	5,780
	late fee collected for april month sales	5780*2%	116
d	Total cash available		57,682
e	Less disbursements
f	Inventory purchase :
	current month	72600*64%*20%	9,293
	prior month	53000*64%*80%	27,136
	Salaries & wages	Given	11,750
	Rent	Given	4,400
	Taxes	Given	6,780
g	Total cash needs		59,359
h	Excess of cash available over needs	(d-g)	-1,677