epare a cash budget for October.
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.
Janet Wooster owns a retail store that sells new and used sporting equipment. Janet has requested a
- Cash balance on October 1 is $1,120.
- Actual sales for August and September are as follows:
August September Cash sales $6,000 $4,500 Credit sales 58,000 61,000 Total sales $64,000 $65,500 - Credit sales are collected over a three-month period: 40 percent in the month of sale, 36 percent in the next month, and 22 percent in the second month after the sale. The remaining sales are uncollectible.
- Inventory purchases average 70 percent of a month’s total sales. Of those purchases, 45 percent are paid for in the month of purchase. The remaining 55 percent are paid for in the following month.
- Salaries and wages total $3,850 per month.
- Rent is $3,150 per month.
- Taxes to be paid in October are $1,635.
- Janet usually withdraws $3,500 each month as her salary.
- Advertising is $1,500 per month.
- Other operating expenses total $3,800 per month.
- Internet and telephone fees are $340 per month.
Janet tells you that she expects cash sales of $5,000 and credit sales of $64,000 for October. She likes to have $3,000 on hand at the end of the month and is concerned about the potential October ending balance.
Required:
Prepare a cash budget for October. Include supporting schedules for cash collections and cash payments. Round your intermediate computations and final answers to the nearest dollar.
| Wooster Sporting Goods Store | ||
| Cash Budget | ||
| For the Month of October | ||
| Beginning cash balance | $fill in the blank 1 | |
| Collections: | ||
| Cash sales | fill in the blank 2 | |
| Credit sales: | ||
| October | fill in the blank 3 | |
| September | fill in the blank 4 | |
| August | fill in the blank 5 | |
| Total cash available | $fill in the blank 6 | |
| Disbursements: | ||
| Inventory purchases: | ||
| October | $fill in the blank 7 | |
| September | fill in the blank 8 | |
| Salaries and wages | fill in the blank 9 | |
| Rent | fill in the blank 10 | |
| Taxes | fill in the blank 11 | |
| Other operating expenses | fill in the blank 12 | |
| Owner withdrawal | fill in the blank 13 | |
| Advertising | fill in the blank 14 | |
| Internet and telephone | fill in the blank 15 | fill in the blank 16 |
| Ending cash balance | $fill in the blank 17 |
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