Scan Design provided the following budgeted information for April through July:

Question

Scan Design provided the following budgeted information for April through July:

April May June July
Projected sales $104,000 $123,000 $115,000 $132,000
Projected merchandise purchases $82,000 $92,000 $78,000 $66,000
The cash balance on June 1 is $12,000. The company pays 40% of merchandise purchases in the month purchased and 60% in the following month. General operating expenses are budgeted to be $31,000 per month of which depreciation is $3,000 of this amount. Management pays operating expenses in the month incurred. The company makes loan payments of $4,000 per month of which $600 is interest and the remainder is principal. How much are budgeted cash disbursements for June?

Explanation / Answer

udgeted cash disbursements for purchases:

Cash paid for June purchases ($78,000 x 40%)                               $ 31,200

Cash paid for May purchases ($92,000 x 60%)                                   55,200

Budgeted cash paid for purchases                                                      86,400

Budgeted cash payments for operating expenses ($31,000 - $3,000) 28,000 Budgeted cash payment for loan ($4,000 - $600)                                 3,400

Budgeted cash payment for interest                                                         600

Total budgeted cash disbursements for June $118,400

*Note that depreciation is not subtracted because it is not a cash flow.

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