Chapter 14, Problem 13E

Exercise 7-13A Preparing a cash budget

The accountant for Jean’s Dress Shop prepared the following cash budget. Jean’s desires to maintain a cash cushion of $10,000 at the end of each month. Funds are assumed to be borrowed and repaid on the last day of each month. Interest is charged at the rate of 1 percent per month.

Cash Budget	July	August	September
Section 1: Cash receipts
Beginning cash balance	$25,000	$ ?	$ ?
Add cash receipts	90,000	100,000	120,300
Total cash available (a)	115,000	?	?
Section 2: Cash payments
For inventory purchases	82,750	70,115	87,076
For S&A expenses	27,250	30,280	30,716
For interest expense	0	?	?
Total budgeted disbursements (b)	110,000	?	?
Section 3: Financing activities
Surplus (shortage)	5,000	?	?
Borrowing (repayments) (c)	5,000	?	?
Ending cash balance (a − b + c)	$10,000	$ 10,000	$ 10,000

Required

1. a. Complete the cash budget by filling in the missing amounts. Round all computations to the nearest whole dollar.
2. b. Determine the amount of net cash flows from operating activities Jean’s will report on the third quarter pro forma statement of cash flows.
3. c. Determine the amount of net cash flows from financing activities Jean’s will report on the third quarter pro forma statement of cash flows.