Cash budgeting for Carolina Apple, a merchandising Firm, is performed on a quart

Question

Cash budgeting for Carolina Apple, a merchandising Firm, is performed on a quarterly basis. The company is planning its cash needs for The third quarter of 2014, and The following information is available To assist in preparing a cash budget. Budgeted income statements for July Through October 2014 are as follows:

Additional information follows:

1. Other expenses, which are paid monthly, include $1,000 of depreciation per month.

2. Sales are 40 percent for cash and 60 percent on credit.

3. Credit sales are collected 25 percent in The month of sale, 65 percent one month after sale, and 10 percent Two months a²er sale. May sales were $15,000, and June sales were $16,000.

4. Merchandise is paid for 50 percent in the month of purchase; The remaining 50 percent is paid in The following month. Accounts payable for merchandise at June 30 Totaled $6,000.

5. ±he company maintains its ending inventory levels at 20 percent of The cost of goods To be sold in The following month. The inventory at June 30 is $2,500.

6. An equipment note of $5,000 per month is being paid Through August.

7. ±he company must maintain a cash balance of at least $5,000 at The end of each month. The cash balance on June 30 is $5,100.

8. The company can borrow from its bank as needed. Borrowings and repayments must be in multiples of $100. All borrowings Take place at The beginning of a month, and all repayments are made at The end of a month. When The principal is repaid, interest on The repayment is also paid. The interest rate is 12 percent per year.

Required

a. Prepare a monthly schedule of budgeted operating cash receipts for July, August, and September.

b. Prepare a monthly purchases budget and a schedule of budgeted cash payments for purchases for July, August, and September.

c. Prepare a monthly cash budget for July, August, and September. Show borrowings from The company’s bank and repayments To The bank as needed To maintain The minimum cash balance.

August October July $18,000 (10,000) 8,000 $24,000 (14,000) 10,000 September $28,000 (16,000) 12,000 $36,000 (20,000) 16,000 Sales ....... Cost of goods sold .... Gross profit ...... Less other expenses Selling.. Administrative . Total . Net income... 2,300 2,600 (4,900) $ 3,100 3,000 3,000 (6,000) $ 4,000 3,400 3,200 (6,600) $ 5,400 4,200 3,600 (7,800) $ 8,200

Explanation / Answer

Description May   June July August September October Sale revenue                15,000                 16,000          18,000          24,000            28,000          36,000 Cash Sale-40%                  6,000                    6,400            7,200            9,600            11,200          14,400 Credit Sale-60%                  9,000                    9,600          10,800          14,400            16,800          21,600 Credit sale collection- same month-25%                  2,250                    2,400            2,700            3,600              4,200            5,400 Credit sale collection- next month-65%                    5,850            6,240            7,020              9,360          10,920 Credit sale collection- following month-10%                900                960              1,080            1,440 Cash sale            7,200            9,600            11,200          14,400 Monthly sale collection          17,040          21,180            25,840          32,160 Cost of goods soldv(COGS)          10,000          14,000            16,000          20,000 Finished Stock Opening Stock-Quanitity            2,500            2,800              3,200            4,000 Closing Stock -20% of following month COGS            2,800            3,200              4,000                   -   COGS sold + closing stock          12,800          17,200            20,000          20,000 less openign stock          (2,500)          (2,800)            (3,200)          (4,000) Purchase during the month          10,300          14,400            16,800          16,000 Purchase payment-same month-50%            5,150            7,200              8,400            8,000 Purchase payment-next month-50%            6,000            5,150              7,200            8,400 Total Merchandise payment          11,150          12,350            15,600          16,400 Selling expense            2,300            3,000              3,400 Administrative expense            2,600            3,000              3,200 Less Depreciation          (1,000)          (1,000)            (1,000) Payment other expense            3,900            5,000              5,600 Opening cash            5,100            5,090              5,020 Budgeted Receipts          17,040          21,180            25,840 Budgeted Cash payments Accounts payable       (11,150)       (12,350)          (15,600) Other expense          (3,900)          (5,000)            (5,600) Equipment          (5,000)          (5,000) Preliminary cash balance            2,090            3,920              9,660 Borrow/(paid back)            3,000            1,100            (4,100) interest Payment @ 1% per month                (112) Closing cash balance            5,090            5,020              5,448 Interest Loan of July =3000*12%*3/12 90 Loan of August =1100*12%*2/12 22                112

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.