Additional information follows: 1. Other expenses, which are paid monthly, include $3,500 of depreciation per month. 2. Sales are 44% for cash and 56% on credit. 3. Credit sales are collected 50% in the month of sale, 35% one month after sale, and 15% two months after sale. May sales were $40,000, and June sales were $42,000. 4. Merchandise is paid for 50% in the month of purchase; the remaining 50% is paid in the following month. Accounts payable for merchandise
Additional information follows: 1. Other expenses, which are paid monthly, include $3,500 of depreciation per month. 2. Sales are 44% for cash and 56% on credit. 3. Credit sales are collected 50% in the month of sale, 35% one month after sale, and 15% two months after sale. May sales were $40,000, and June sales were $42,000. 4. Merchandise is paid for 50% in the month of purchase; the remaining 50% is paid in the following month. Accounts payable for merchandise
Additional information follows: 1. Other expenses, which are paid monthly, include $3,500 of depreciation per month. 2. Sales are 44% for cash and 56% on credit. 3. Credit sales are collected 50% in the month of sale, 35% one month after sale, and 15% two months after sale. May sales were $40,000, and June sales were $42,000. 4. Merchandise is paid for 50% in the month of purchase; the remaining 50% is paid in the following month. Accounts payable for merchandise
Additional information follows: 1. Other expenses, which are paid monthly, include $3,500 of depreciation per month. 2. Sales are 44% for cash and 56% on credit. 3. Credit sales are collected 50% in the month of sale, 35% one month after sale, and 15% two months after sale. May sales were $40,000, and June sales were $42,000. 4. Merchandise is paid for 50% in the month of purchase; the remaining 50% is paid in the following month. Accounts payable for merchandise at June 30 totaled $12,000. 5. The store maintains its ending inventory levels at 30% of the cost of goods to be sold in the follow- ing month. The inventory at June 30 is $7,600. 6. An equipment note of $10,000 per month is being paid through August. 7. The store must maintain a cash balance of at least $10,000 at the end of each month. The cash bal- ance on June 30 is $10,000. 8. The store can borrow from its bank as needed. Borrowings and repayments must be in multiples of $100. All borrowings take place at the beginning of a month, and all repayments are made at the end of a month. When the principal is repaid, interest on the repayment is also paid. The interest rate is 6% per year. Required a. Prepare a monthly schedule of budgeted operating cash receipts for July, August, and September. b. Prepare a monthly purchases budget and a schedule of budgeted cash payments for purchases for July, August, and September. c. Prepare a monthly cash budget for July, August, and September. Show borrowings from the store’s bank and repayments to the bank as needed to maintain the minimum cash balance.
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Transcribed Image Text:Assume all Office Depot stores do cash budgeting every quarter. One store is planning its cash needs
for the third quarter of the year, and the following information is available to assist in preparing a cash
budget. Budgeted income statements for July through October are as follows:
Sales......
Cost of goods sold
Gross profit.....
Less other expenses
Selling....
Administrative.
Total ..
Net income.
July
$45,000
23,500
21,500
6,000
9,100
(15,100)
$ 6,400
August
$52,000
25,500
26,500
8,000
10,500
(18,500)
$ 8,000
September
$60,000
30,500
29,500
8,500
8,500
(17,000)
$12,500
October
$75,000
35,000
40,000
10,500
9,400
(19,900)
$20,100
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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