Given the following information, prepare a cash budget of June - August. Show solution. A company is preparing its budget for the upcoming fiscal year. Management has found out that 20% ofits sales during the month were for cash. The company has the following accounts receivable paymentexperience:Percent paid in the month of salePercent paid in the month after the salePercent paid in the second month after the sale50%30%20%The company's anticipated sales for the next few months are:AprilMay250,000245,000June270,000JulyAugust295,000300,000Purchases on account for the month are:AprilMay50% of sales30% of salesJune35% of cash salesJulyAugust40% of sales20% of salesOperating expenses for the month are as follows:AprilMay10,00020% of purchases for the month15,000 – of which 2,000 is attributable to depreciation expense10% of the cash sales of the following monthJuneJulyAugust5,000 - amortization expenseThe company's beginning cash balance will be 20,000.

Cash Budget - Budgeting is the great method of controlling expense that are not necessary in nature.…

Answered: A company is preparing its budget for…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Given the following information, prepare a cash budget of June - August. Show solution.

A company is preparing its budget for the upcoming fiscal year. Management has found out that 20% of
its sales during the month were for cash. The company has the following accounts receivable payment
experience:
Percent paid in the month of sale
Percent paid in the month after the sale
Percent paid in the second month after the sale
50%
30%
20%
The company's anticipated sales for the next few months are:
April
May
250,000
245,000
June
270,000
July
August
295,000
300,000
Purchases on account for the month are:
April
May
50% of sales
30% of sales
June
35% of cash sales
July
August
40% of sales
20% of sales
Operating expenses for the month are as follows:
April
May
10,000
20% of purchases for the month
15,000 – of which 2,000 is attributable to depreciation expense
10% of the cash sales of the following month
June
July
August
5,000 - amortization expense
The company's beginning cash balance will be 20,000.

Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.

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