The owner of a small mining supply company has requested a cash budget for June. pr requi deve After examining the records or the company, you find the following: udget a. Cash balance on June 1 is $345. b. Actual sales for April and May are April Мay Cash sales Credit sales Total sales $ 10,000 25,000 $35,000 $15,000 25,000 $40,000 c. Credit sales are collected over a three-month period: 50 percent in the month of sale, 30 percent in the second month, and 15 percent in the third month. The sales collected in the third month are subject to a 1.5 percent late fee, but only half of the affected customers pay the late fee, and the owner does not think it is worth his while to try to collect from the other half. The remaining sales are R uncollectible. d. Inventory purchases average 60 percent of a month's total sales. Of those pur- chases, 40 percent are paid for in the month of purchase. The remaining 60 cent are paid for in the following month. e. Salaries and wages total $8,700 a month, including a $4,500 salary paid to the per- owner. f. Rent is $1,200 per month. g. Taxes to be paid in June are $5,500. The owner also tells you that he expects cash sales of $20,000 and credit sales of $30,000 for June. There is no minimum cash balance required. The owner of the company does not have access to short-term loans. Required
The owner of a small mining supply company has requested a cash budget for June. pr requi deve After examining the records or the company, you find the following: udget a. Cash balance on June 1 is $345. b. Actual sales for April and May are April Мay Cash sales Credit sales Total sales $ 10,000 25,000 $35,000 $15,000 25,000 $40,000 c. Credit sales are collected over a three-month period: 50 percent in the month of sale, 30 percent in the second month, and 15 percent in the third month. The sales collected in the third month are subject to a 1.5 percent late fee, but only half of the affected customers pay the late fee, and the owner does not think it is worth his while to try to collect from the other half. The remaining sales are R uncollectible. d. Inventory purchases average 60 percent of a month's total sales. Of those pur- chases, 40 percent are paid for in the month of purchase. The remaining 60 cent are paid for in the following month. e. Salaries and wages total $8,700 a month, including a $4,500 salary paid to the per- owner. f. Rent is $1,200 per month. g. Taxes to be paid in June are $5,500. The owner also tells you that he expects cash sales of $20,000 and credit sales of $30,000 for June. There is no minimum cash balance required. The owner of the company does not have access to short-term loans. Required
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
Transcribed Image Text:Prepare a schedule of
15
The owner of a small mining supply company has requested a cash budget é
After examining the records or the company, you find the following:
ch Budget
ust.
a. Cash balance on June 1 is $345.
b. Actual sales for April and May are
requires
develope
Overh
prod
April
Мay
Cash sales
Credit sales
Mai
$ 10,000
25,000
$35,000
Pov
$15,000
25,000
Inc
Re
Total sales
$40,000
c. Credit sales are collected over a three-month period: 50 percent in the month of
sale, 30 percent in the second month, and 15 percent in the third month. The
sales collected in the third month are subject to a 1.5 percent late fee, but only
half of the affected customers pay the late fee, and the owner does not think it ie
worth his while to try to collect from the other half. The remaining sales are
Requ
1. L
2.
uncollectible.
d. Inventory purchases average 60 percent of a month's total sales. Of those pur-
chases, 40 percent are paid for in the month of purchase. The remaining 60 per-
cent are paid for in the following month.
e. Salaries and wages total $8,700 a month, including a $4,500 salary paid to the
Re
owner.
du
f. Rent is $1,200 per month.
g. Taxes to be paid in June are $5,500.
in
The owner also tells you that he expects cash sales of $20,000 and credit sales of
$30,000 for June. There is no minimum cash balance required. The owner of the
company does not have access to short-term loans.
Required
Transcribed Image Text:Prepare a sc
8-15
The owner of a emall minin
of
Cash Pudg
LOZ
is $345.
a. Ceh balance on June
b Actual enles for April and
April
May are
EXCEL
$ 10,000
25.000
$35.000
Мay
CRsh sales
Credit sales
Total sales
$15,000
25,000
%2440,000
overhea
Maintenanc
Power
Indirect labor
sales collected in the third
Rent
month are subject to a 1.5 percent late fee, but
Required
uncollectible.
only
chases, 40 percent are par 1or in the month of purchase. The remaining
cent are paid for in the following month.
e Salaries and wages total 20,700 a month, including a $4,500 salary paid to a
than expected
a
Refer to the info
duced 120,00o
incurred were
Owner.
f. Rent is $1,200 per month.
g. Taxes to be paid in June are $5,500.
The owner also tells you that ne expects cash sales of $20,000 and credit sales of
$30,000 for June. There is no minimum cash balance required. The owner of the
company does not have access to short-term loans.
per-
Maintenance
Power
Indirect lab
Required
Rent
1. Prepare a cash budget for June. Include supporting schedules for cash collections
and cash payments.
2. Did the business show a negative cash balance for June? Assuming that the
owner has no hope of establishing a line of credit for the business, what recom-
mendations would you give the owner for dealing with a negative cash balance?
Required
1. Prep
2. Bas
Ca
An
The
ba
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