Preparing a Cash BudgetLa Famiglia Pizzeria provided the following information for the month of October:a. Sales are budgeted to be $163,000. About 85% of sales is cash; the remainder is on account.b. La Famiglia expects that, on average, 70% of credit sales will be paid in the month of sale, and 28% will be paid in the following month.c. Food and supplies purchases, all on account, are expected to be $103,000. La Famiglia pays 25% in the month of purchase and 75% in the month following purchase.d. Most of the work is done by the owners, who typically withdraw $6,000 a month from the business as their salary. (Note: The $6,000 is a payment in total to the twoowners, not per person.) Various part-time workers cost $7,300 per month. They are paid for their work weekly, so on average 90% of their wages are paid in themonth incurred and the remaining 10% in the next month.e. Utilities average $5,950 per month. Rent on the building is $4,100 per month.f. Insurance is paid quarterly; the next payment of $900 is due in October.g. September sales were $181,500 and purchases of food and supplies in September equaled $130,000.h. The cash balance on October 1 is $2,147.Required:If required, round your answers to the nearest dollar.1. Calculate the cash receipts expected in October.$42. Calculate the cash needed in October to pay for food purchases.3. Prepare a cash budget for the month of October.La Famiglia PizzeriaCash budgetFor the month of OctoberBeginning balanceCash receiptsCach available. 1. Calculate the cash receipts expected in October.2. Calculate the cash needed in October to pay for food purchases.3. Prepare a cash budget for the month of October.La Famiglia PizzeriaCash budgetFor the month of OctoberBeginning balanceCash receiptsCash availableLess:Payments for food and supplies purchasesOwners' drawWorkers' wagesUtilitiesRentInsuranceTotal disbursementsEnding balance

Cash budget is an estimate of cash flow for a particular future period.

Answered: Cash Budget

Business

Accounting

Cash Budget

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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Concept explainers

Master Budget

A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.

Sales Budget and Selling

A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.

Question

Preparing a Cash Budget
La Famiglia Pizzeria provided the following information for the month of October:
a. Sales are budgeted to be $163,000. About 85% of sales is cash; the remainder is on account.
b. La Famiglia expects that, on average, 70% of credit sales will be paid in the month of sale, and 28% will be paid in the following month.
c. Food and supplies purchases, all on account, are expected to be $103,000. La Famiglia pays 25% in the month of purchase and 75% in the month following purchase.
d. Most of the work is done by the owners, who typically withdraw $6,000 a month from the business as their salary. (Note: The $6,000 is a payment in total to the two
owners, not per person.) Various part-time workers cost $7,300 per month. They are paid for their work weekly, so on average 90% of their wages are paid in the
month incurred and the remaining 10% in the next month.
e. Utilities average $5,950 per month. Rent on the building is $4,100 per month.
f. Insurance is paid quarterly; the next payment of $900 is due in October.
g. September sales were $181,500 and purchases of food and supplies in September equaled $130,000.
h. The cash balance on October 1 is $2,147.
Required:
If required, round your answers to the nearest dollar.
1. Calculate the cash receipts expected in October.
$4
2. Calculate the cash needed in October to pay for food purchases.
3. Prepare a cash budget for the month of October.
La Famiglia Pizzeria
Cash budget
For the month of October
Beginning balance
Cash receipts
Cach available.

1. Calculate the cash receipts expected in October.
2. Calculate the cash needed in October to pay for food purchases.
3. Prepare a cash budget for the month of October.
La Famiglia Pizzeria
Cash budget
For the month of October
Beginning balance
Cash receipts
Cash available
Less:
Payments for food and supplies purchases
Owners' draw
Workers' wages
Utilities
Rent
Insurance
Total disbursements
Ending balance

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