Nestee controller for Mactan Relaters has assembled the following data to assist in the preparation of a cash budget for the third quarter of 2021: Sales- May $100,000 ;June $120,000; July $90,000 ; August $100,000 September $135,000; October $110,000 Each month, 30% of sales are for cash and 70% ore on credit. The collection pattern for credit sales is 20% in the month of sale, 50% in the following month, and 30% in the second month following the sale. Each month the ending inventory exactly equals 50% of the cost of next month's sales. The markup on goods is 25% of cost. Inventory purchases are paid in the month following the purchase. Monthly expenses are as follows: Salaries and wages $10,000; Depreciation $4,000; Utlites $1,000; Other $1,700. Property taxes of $15,000 are due and payable on July 15,2021. Advertising fees of $6,000 must be paid on August 20,2021. A lease on a new storage facility is scheduled to begin on September 2, 2021.Monthly payments are $5,000. The company has a policy to maintain a minimum cash balance of $10,000. If necessary , it will borrow to meet its short term needs. All borrowing is done at the end of the month. All payments on principal and interest are made at the end of a month. The annual interest rate is 9%. The company must borrow in multiples of $1,000. The balance sheet as of June 30, 2021 is as follows: Cash $ 13,550 Accounts Receivable 88,200 Inventory 36,000 Plant and Equipment, net 425,000 Accounts Payable $ 84,000 Ordinary Share Capital 210,000 Retained Earnings 268,750 7.) What is the net income for the 3rd quarter? a. $22,300 b. $(11,145) c. $(11,100) d. $(22,255) 8.) What is the ending cash balance of July? a. $10,000 b. $37,650 c. $10,550 d. $10,450 9.) What is the ending cash balance of August? a. $16,000 b. $6,000 c. $37,605 d. $10,405

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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Nestee controller for Mactan Relaters has assembled the following data to assist in the preparation of a cash budget for the third quarter of 2021:

Sales- May $100,000 ;June $120,000; July $90,000 ; August $100,000

September $135,000; October $110,000

Each month, 30% of sales are for cash and 70% ore on credit. The collection pattern for credit sales is 20% in the month of sale, 50% in the following month, and 30% in the second month following the sale.
Each month the ending inventory exactly equals 50% of the cost of next month's sales. The markup on goods is 25% of cost.
Inventory purchases are paid in the month following the purchase.
Monthly expenses are as follows: Salaries and wages $10,000; Depreciation $4,000; Utlites $1,000; Other $1,700.
Property taxes of $15,000 are due and payable on July 15,2021.
Advertising fees of $6,000 must be paid on August 20,2021.
A lease on a new storage facility is scheduled to begin on September 2, 2021.Monthly payments are $5,000.
The company has a policy to maintain a minimum cash balance of $10,000. If necessary , it will borrow to meet its short term needs. All borrowing is done at the end of the month. All payments on principal and interest are made at the end of a month. The annual interest rate is 9%. The company must borrow in multiples of $1,000.
The balance sheet as of June 30, 2021 is as follows:

Cash	$ 13,550
Accounts Receivable	88,200
Inventory	36,000
Plant and Equipment, net	425,000
Accounts Payable		$ 84,000
Ordinary Share Capital		210,000
Retained Earnings		268,750

7.) What is the net income for the 3rd quarter?

a. $22,300

b. $(11,145)

c. $(11,100)

d. $(22,255)

8.) What is the ending cash balance of July?

a. $10,000

b. $37,650

c. $10,550

d. $10,450

9.) What is the ending cash balance of August?

a. $16,000

b. $6,000

c. $37,605

d. $10,405

Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.

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