Assume that sales and expenses forecasts for months April, May, June, and July are as follows. 20% of all sales in a month are paid in the same month, 60% are paid in the next month, and 20% are paid in the second month after. All expenses in a month are paid in the same month. There is a $20,000,000 minimum required cash balance at the end of each month, and any shortage from this minimum requirement will be covered by obtaining a loan. Any excess over $20,000,000 will be used to reduce or pay off cumulative loan. Initial cash balance in June is $6,000,000 and there is no cumulative loan at this time. Monthly prorated tax rate is 2%, and monthly interest rate on cumulative loan is 1%. Requirements: Prepare cash budget proforma for months June and July. Provide in-text citations and references, and explain your work in detail.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Assume that sales and expenses forecasts for months April, May, June, and July are as follows.

20% of all sales in a month are paid in the same month, 60% are paid in the next month, and 20% are paid in the second month after. All expenses in a month are paid in the same month. There is a $20,000,000 minimum required cash balance at the end of each month, and any shortage from this minimum requirement will be covered by obtaining a loan.

Any excess over $20,000,000 will be used to reduce or pay off cumulative loan.

Initial cash balance in June is $6,000,000 and there is no cumulative loan at this time.

Monthly prorated tax rate is 2%, and monthly interest rate on cumulative loan is 1%.

Requirements:

Prepare cash budget proforma for months June and July.

Provide in-text citations and references, and explain your work in detail. 

 

Month
Sales
$40,000,000
$35,000,000
$50,000,000
$60,000,000
Expenses
$25,000,000
$20,000,000
$30,000,000
$35,000,000
April
May
June
July
Transcribed Image Text:Month Sales $40,000,000 $35,000,000 $50,000,000 $60,000,000 Expenses $25,000,000 $20,000,000 $30,000,000 $35,000,000 April May June July
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