Cash budget Basic Grenoble Enterprises had sales of $49,500 in March and $59,500

Question

Cash budget Basic Grenoble Enterprises had sales of $49,500 in March and $59,500 in April. Forecast sales for May, June, and July are $70,500, $80,500, and $99.700, respectively. The firm has a cash balance of $5,100 on May 1 and wishes to maintain a minimum cash balance of $5,100. Given the following data, prepare and interpret a cash budget for the months of May, June, and July. (1) The firm makes 22% of sales for cash, 61% are collected in the next month, and the remaining 17% are collected in the second month following sale (2) The firm receives other income of $2,300 per month (3) The firm's actual or expected purchases, all made for cash, are $49,800, $70,500, and S80,000 for the months of May through July, respectively. (4) Rent is $2,700 per month. (5) Wages and salaries are 8% of the previous month's sales. (6) Cash dividends of $2,500 will be paid in June. (7) Payment of principal and interest of $3,700 is due in June. (8) A cash purchase of equipment costing S$6,500 is scheduled in July. (9) Taxes of $5,500 are due in June

Explanation / Answer

CASH BUDGET March April May June July Sales $               49,500 $               59,500 $                70,500 $                 80,500 $                 99,700 Cash Sales 22% $               10,890 $               13,090 $                15,510 $                 17,710 $                 21,934 61% is collected in next Months $               30,195 $                36,295 $                 43,005 $                 49,105 17% collected in second month of Sales $                  8,415 $                 10,115 $                 11,985 Cash Collection against Sales $               60,390 $           1,02,785 $            1,30,720 $             1,51,330 $             1,82,724 Other Income $                 2,300 $                 2,300 $                  2,300 $                   2,300 $                   2,300 Total Cash Receipts $               62,690 $           1,05,085 $            1,33,020 $             1,53,630 $             1,85,024 Less : Expenses Actual Purchases $                49,800 $                 70,500 $                 80,000 Rent $                 2,700 $                 2,700 $                  2,700 $                   2,700 $                   2,700 Wages and Salaries $                 3,960 $                  4,760 $                   5,640 $                   6,440 Cash Dividends $                   2,500 Principal and interest $                   3,700 Equipment $                   6,500 Taxes $                   5,500 Total Cash Payments $                 2,700 $                 6,660 $                57,260 $                 90,540 $                 95,640 Balance After Expenses $                75,760 $                 63,090 $                 89,384

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