Question

Grenoble Enterprises had sales of

$49,700 in March and

$60,300 in April. Forecast sales for May, June, and July are

$70,400 ,

$79,500 , and

$100,500 , respectively. The firm has a cash balance of

$4,900 on May 1 and wishes to maintain a minimum cash balance of

$4,900. Given the following data, prepare and interpret a cash budget for the months of May, June, and July.

(1) The firm makes 23% of sales for cash, 57% are collected in the next month, and the remaining 20% are collected in the second month following sale.

(2) The firm receives other income of $2,500 per month.

(3) The firm's actual or expected purchases, all made for cash, are $50,400 ,$69,900 , and

$79,700 for the months of May through July, respectively.

(4) Rent is $3,400 per month.

(5) Wages and salaries are 10% of the previous month's sales.

(6) Cash dividends of $3,500 will be paid in June.

(7) Payment of principal and interest of $4,500 is due in June.

(8) A cash purchase of equipment costing $5,500 is scheduled in July.

(9) Taxes of $5,600 are due in June.

Answer 1