Castor Incorporated is preparing its master budget. Budgeted sales and cash payments for merchandise purchases for the next three months follow. June April $ 30,000 May Budgeted Sales $ 42,000 $ 26,000 Cash paynents tor merchandise purchases 24,200 14,800 13,500 Sales are 80% cash and 20% on credit. Sales in March were $26,000. All credit sales are collected in the month following the sale. The March 31 balance sheet includes balances of $14,000 in cash and $4,000 in loans payable. A minimum cash balance of $14,000 is required. Loans are obtained at the end of any month when the preliminary cash balance is below $12,000. Interest is 1% per month based on the beginning-of-the-month loan balance and is paid at each month-end. If a preliminary cash balance above $12,000 at month-end exists, loans are repaid from the excess. Expenses are paid in the month incurred and include sales commissions (10% of sales), shipping (4% of sales), office salaries ($7,000 per month), and rent ($5,000 per month). (a) Prepare a scheduie of cash receipts from sales for April, May, and June. (b) Prepare a cash budget for each of April, May, and June. (Negative balances and Loan repayment amounts (if any) should be indicated with minus sign. Round your final answers to the nearest whole dollar.)
Castor Incorporated is preparing its master budget. Budgeted sales and cash payments for merchandise purchases for the next three months follow. June April $ 30,000 May Budgeted Sales $ 42,000 $ 26,000 Cash paynents tor merchandise purchases 24,200 14,800 13,500 Sales are 80% cash and 20% on credit. Sales in March were $26,000. All credit sales are collected in the month following the sale. The March 31 balance sheet includes balances of $14,000 in cash and $4,000 in loans payable. A minimum cash balance of $14,000 is required. Loans are obtained at the end of any month when the preliminary cash balance is below $12,000. Interest is 1% per month based on the beginning-of-the-month loan balance and is paid at each month-end. If a preliminary cash balance above $12,000 at month-end exists, loans are repaid from the excess. Expenses are paid in the month incurred and include sales commissions (10% of sales), shipping (4% of sales), office salaries ($7,000 per month), and rent ($5,000 per month). (a) Prepare a scheduie of cash receipts from sales for April, May, and June. (b) Prepare a cash budget for each of April, May, and June. (Negative balances and Loan repayment amounts (if any) should be indicated with minus sign. Round your final answers to the nearest whole dollar.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
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
Transcribed Image Text:Castor Incorporated is preparing its master budget. Budgeted sales and cash payments for merchandise purchases for the next three
months follow.
April
$ 30,000
June
Budgeted
Sales
Cash payments for merchandise
purchases
May
$ 42,000
$ 26,000
24,200
14,800
13,500
Sales are 80% cash and 20% on credit. Sales in March were $26,000. All credit sales are collected in the month following the sale. The
March 31 balance sheet includes balances of $14,000 in cash and $4,000 in loans payable. A minimum cash balance of $14,000 is
required. Loans are obtained at the end of any month when the preliminary cash balance is below $12,000. Interest is 1% per month
based on the beginning-of-the-month loan balance and is paid at each month-end. If a preliminary cash balance above $12,000 at
month-end exists, loans are repaid from the excess. Expenses are paid in the month incurred and include sales commissions (10% of
sales), shipping (4% of sales), office salaries ($7,000 per month), and rent ($5,000 per month).
(a) Prepare a schedule of cash receipts from sales for April, May, and June. (b) Prepare a cash budget for each of April, May, and June.
(Negative balances and Loan repayment amounts (if any) should be indicated with minus sign. Round your final answers to the
nearest whole dollar.)
Answer is not complete.
Transcribed Image Text:Schedule of Cash Receipts from Sales
April
May
June
24
30,000
42,000
26,000
Cash receipts from
Cash sales
24,000
33,600
20,800
Collections of prior period sales
14,000
6,000
8,400
Total cash receipts
38,000
39,600
29,200
CASTOR, INCORPORATED
Cash Budget
April
May
June
Beginning cash balance
14,000
14,000
24
14,416 X
Add: Cash receipts from sales
38,000 8
39,600
29,200
Total cash available
52,000
53,600
43,616
Less: Cash payments for:
Merchandise
24,200
14,800
13,500
Sales commissions
3,000
4,200
2,600
Shipping
1,200
1,680
1,040
Rent
5,000
5,000
5,000
Office salaries
7,000
7,000
7,000
Interest on loan
40
64
0.
Total cash payments
40,440
32,744
29,140
Preliminary cash balance
11,560
20,856
14,476 X
Additional loan (loan repayment)
2,440 X
(6,440) 8
Ending cash balance
14,000
14,416
14,476
Loan balance
April
May
June
Loan balance - Beginning of month
4,000
%24
6,440
Additional loan (loan repayment)
2,440
(6,440)
Loan balance - End of month
6,440
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