Castor, Inc., is preparing its master budget for the quarter ended June 30. Budg
ID: 2545236 • Letter: C
Question
Castor, Inc., is preparing its master budget for the quarter ended June 30. Budgeted sales and cash payments for merchandise for the next three months follow:
Sales are 70% cash and 30% on credit. All credit sales are collected in the month following the sale. The March 31 balance sheet includes balances of $13,000 in cash, $13,000 in accounts receivable, $11,000 in accounts payable, and a $3,000 balance in loans payable. A minimum cash balance of $13,000 is required. Loans are obtained at the end of any month when a cash shortage occurs. Interest is 1% per month based on the beginning of the month loan balance and is paid at each month-end. If an excess balance of cash exists, loans are repaid at the end of the month. Operating expenses are paid in the month incurred and include sales commissions (10% of sales), shipping (2% of sales), office salaries ($4,000 per month), and rent ($6,000 per month).
Prepare a cash budget for each of the months of April, May, and June. (Negative balances and Loan repayment amounts (if any) should be indicated with minus sign. Round your final answers to the nearest whole dollar.)
Explanation / Answer
Cash budget Apr May June Total Opening cash Balance 13,000 13,730 15,960 13,000 Add: receipts Collection from Customers 34,700 38,000 29,800 102,500 Total Cash available 47,700 51,730 45,760 115,500 Less: Disbursements For Inventory Purchase 22,200 15,800 16,200 54,200 For Operating Expenses: Sales Commision - 10% of Sales 3,100 4,100 2,500 9,700 Shipping - 2% of Sales 620 820 500 1,940 Office Salaries 4,000 4,000 4,000 12,000 Rent Expense 6,000 6,000 6,000 18,000 Total Disbursements 35,920 30,720 29,200 95,840 Excess (deficiency) of cash available over disbursements 11,780 21,010 16,560 19,660 Financing: Borrowings 2,000 - - 2,000 Repayment - (5,000) - (5,000) Payment of interet - Bank loan (50) (50) - (100) Total Financing Net Cash Balance Closing 13,730 15,960 16,560 16,560 Sales Budget Apr May June Total Sales in $ 31,000 41,000 25,000 97,000 Cash Sales -70% 21,700 28,700 17,500 67,900 Credit Sales - 30% 9,300 12,300 7,500 29,100 Answer 1. Schedule of Expected Cash Collections from Sales Apr May June Total Cash Sales 21,700 28,700 17,500 67,900 Sales on account: Accounts Receivable - March 13,000 13,000 Apr Sales - 9,300 9,300 May Sales - - 12,300 12,300 Total cash Collections 34,700 38,000 29,800 102,500
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