Question

I'm currently trying to understand on how to prepare for cash budget and came across this question during revision and seem to get stuck on how to begin. Appreciate your help in assisting me how to approach this question:

Consider the budgeted income statement for GiGi Inc. for the month ended 30 June 2019 below:-

                                                                                                   USD USD

Sales                                                                                                                290,000

Less:    Cost of Goods Sold

            Inventory, 31 May 2019                                              50,000

            Purchases                                                                    192,000

            Available for sale                                                        242,000

            Inventory, 30 June 2019                                             40,000

                                                                                                                        202,000

Gross profit                                                                                                     88,000

Less:    Operating expenses

            Wages                                                                         36,000

            Utilities                                                                            5,000

            Advertising                                                                    10,000

            Depreciation                                                                   1,000

            Office expenses                                                               4,000

            Insurance and property taxes                                       3,000            59,000

Operating profit                                                                                              29,000

                                                                                                                        =====

Additional information:

• The cash balance on 31 May 2019 USD15,000.

• Sales proceeds are collected as follows: 80% the month of sale; 10% the second month; and 10% the third month.

• Accounts receivable are USD44,000 on 31 May 2019 consisting of USD20,000 from April 2019 sales and USD24,000 from May 2019 sales.

• Accounts payable on 31 May 2019 are USD145,000.

• Gigi Inc. pays 25% of purchases during the month of purchase and the remainder during the following month.

• All operating expenses requiring cash are paid during the month of recognition, except that insurance and property taxes are paid annually in December for the forthcoming year.

The question : Prepare a cash budget for June 2019. Confine your analysis to the given data. Ignore income taxes.