Answered: The City of Edwards had the following…

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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The City of Edwards had the following sales of water for the selected months of the current year:

Month	Sales
January	60,000
February	60,000
March	75,000
April	80,000
May	90,000
June	100,000
July	120,000
August	130,000
September	90,000
October	80,000
November	70,000
December	70,000

All sales are on credit. Historically, 60% is collected in the month of sale, 40% during the first month following the sale.

Cost of water averages 70% of sales. Water is purchased in the month of sale. All purchases are paid during the month following the purchase.

Operating costs of $15,000 are paid each month.

The MAY 1st cash balance is expected to be the minimum balance of $10,000.

Money can be borrowed from a local bank in increments of $1,000. (Do not include interest charges in your budget.)

Required:
Prepare a cash budget for the month of MAY only from the Beginning Cash Balance to the Ending Cash Balance.

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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