Options for the left column are - Borrowings - Cash collection from sales - For

Question

Options for the left column are - Borrowings - Cash collection from sales - For payment of dividends - For payment of inventory purchases - For payment of operating expenses
- For payment of other manufacturing expenses
- For payment to retire bond
iPad 10:03 PM ezto.mheducation.com ABC Company's budgeted sales for June, July, and August are 13,400, 17,400, and 15,400 units respectively. The selling price for each unit is $16. Based on past experience, ABC expects that 40% of a month's sales will be collected in the month of sale, 55% in the following month, and 2% in the second month following the sale. ABC Company has a cash balance of $32,000 on August 1 and requires a minimum ending cash balance of $27,000. Cash disbursements budgeted for August include inventory purchases, $32,000; other manufacturing expenses, $105,000; operating expenses, $52,000; bond retirements, $57,000; and dividend payments, $22,000. Required Prepare a cash budget for ABC Company for August. August Beginning cash balance Cash Receipts: Total cash available Cash Disbursements Total cash disbursements Ending cash balance

Explanation / Answer

Cash budget for ABC company for August

Cash collection from sales

Collection against June sales 13,400*16*0.02 =4288

Collection against July sales 17400*16*0.55 =153120

Collection against August sales15400*16*0.40=98560

Total 255,968

August Beginning cash balance 32000 Cash receipts : Cash collection from sales 255,968 Total cash available 287,968 Cash disbursements: For payment of inventory purchases 32,000 For payment of other manufacturing expenses 105,000 For payment of operating expenses 52,000 For payment to retire bond 57,000 For payment of dividends 22000 Total cash disbursements 268,000 Borrowings 7032 Ending cash balance 27000

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