Cash Budget The owner of a building supply company has requested a cash budget for June. After examining the records of the company, you find the following: Cash balance on June 1 is $1,436. Actual sales for April and May are as follows:   April May Cash sales $10,000   $18,000 Credit sales 28,900   35,000 Total sales $38,900   $53,000 Credit sales are collected over a 3-month period: 40% in the month of sale, 30% in the second month, and 20% in the third month. The sales collected in the third month are subject to a 2% late fee, which is paid by those customers in addition to what they owe. The remaining sales are uncollectible. Inventory purchases average 68% of a month's total sales. Of those purchases, 20% are paid for in the month of purchase. The remaining 80% are paid for in the following month. Salaries and wages total $11,750 per month, including a $4,500 salary paid to the owner. Rent is $4,800 per month. Taxes to be paid in June are $6,780. The owner also tells you that he expects cash sales of $18,600 and credit sales of $54,000 for June. No minimum cash balance is required. The owner of the company doesn’t have access to short-term loans. Required: 1.  Prepare a cash budget for June. Include supporting schedules for cash collections and cash payments. Round calculations and final answers to the nearest dollar. Be sure to enter percentages as whole numbers.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Cash Budget

The owner of a building supply company has requested a cash budget for June. After examining the records of the company, you find the following:

  1. Cash balance on June 1 is $1,436.
  2. Actual sales for April and May are as follows:
      April May
    Cash sales $10,000   $18,000
    Credit sales 28,900   35,000
    Total sales $38,900   $53,000
  3. Credit sales are collected over a 3-month period: 40% in the month of sale, 30% in the second month, and 20% in the third month. The sales collected in the third month are subject to a 2% late fee, which is paid by those customers in addition to what they owe. The remaining sales are uncollectible.
  4. Inventory purchases average 68% of a month's total sales. Of those purchases, 20% are paid for in the month of purchase. The remaining 80% are paid for in the following month.
  5. Salaries and wages total $11,750 per month, including a $4,500 salary paid to the owner.
  6. Rent is $4,800 per month.
  7. Taxes to be paid in June are $6,780.

The owner also tells you that he expects cash sales of $18,600 and credit sales of $54,000 for June. No minimum cash balance is required. The owner of the company doesn’t have access to short-term loans.

Required:

1.  Prepare a cash budget for June. Include supporting schedules for cash collections and cash payments. Round calculations and final answers to the nearest dollar. Be sure to enter percentages as whole numbers.

Cash Budget
For June
Beginning cash balance
Collections:
Cash sales
Credit sales:
Current month
%
May credit sales
%
April credit sales
Total cash available
Less disbursements:
Inventory purchases:
Current month
Prior month
%
Salaries and wages
Rent
Taxes
Total cash needs
Excess of cash available over needs
2. Conceptual Connection: Did the business show a negative cash balance for June?
Transcribed Image Text:Cash Budget For June Beginning cash balance Collections: Cash sales Credit sales: Current month % May credit sales % April credit sales Total cash available Less disbursements: Inventory purchases: Current month Prior month % Salaries and wages Rent Taxes Total cash needs Excess of cash available over needs 2. Conceptual Connection: Did the business show a negative cash balance for June?
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