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Safari File Edit View History Bookmarks window Help 100% Eg Tue 12:42 AM Q cvg.cengagenow.com CUNY Login Login CengageNOW | Online t... Untitled I Safari File Edit View Hi. Capel Company's mana es Capel Company's management prepared a budgeted income statement from its operation budgets. The next step is to prepare the company's cash budget. The following budget assumptions were used to construct the budget: Capel's total sales for each month were first calculated in the sales budget and are reflected on the first line of the cash budget. * Capel's sales are made on credit with terms of 2/10, net 30, Capel's experience is that 25% is collected from customers who take advantage of the discount, 65% is collected in the second month, and the last 10% is collected in the third month after the sale. The budget assumes that there are no bad debts. ·The cost of materials average 55% of Capel's finished product. The purchases are generally made one month in advance of the sale and Capel pays its suppliers in 30 days. Accordingly, if July sales are forecasted at $1,320 million, then purchases during June would be $726 ($1,320 mion x .055), and this amount would be paid in July. Other cash expenses include wages and salaries at 15% of sales, monthly rent of $48, and other expenses at 5% of sales. Estimated tax payments of $70 and $73 are required to be paid on July 15th and October 15th, respectively. In addition, a $1,200 payment for a new plant must be made in September. Assume that Capel's targeted cash balance is $200 and the estimated cash on hand on July 1 is $217 Fill in the blanks in the company's cash budget for the last six months of the year. (Note that numbers are in millions.) Enter negative values as negative numbers. If an amount is zero, enter "O" Capel Cash Budget For the Six Months Ended December 31, Year 1 MayJun $1,140 $1,176 660 Jul Aug 1,200 $1,212 3 680 Aug Sep $1,236 693 Oct Nov Dec $1,260 $1,296 $1,320 Credit sales Credit purchases 713 726 Jul Sep Oct Nov Dec Cash receipts Collections from this month's sales 309 803 121 318 819 124 297 3 780 118 303 788 120 323 842 126 Collections from previous month's sales Collections from sales two months previously

Explanation / Answer

Capel

Cash Budget (No. in Millions)

For the Six Months Ended December 31, Year 1

$1320

($1200*25%)-2%

= $294

$1176*65%

= $764

$1140*10%

= $114

$1260*15%

= $189

$1260*5%

= $63

$200

$200

$200

Note- 1. Figures has been rounded off.

2. Question has been solved as per given assumption.

May June July August September October November December Credit Sales $1140 $1176 $1200 $1212 $1236 $1260 $1296

$1320

Credit Purchaes $660 $1212*55% = $667 $680 $693 $713 $726 -

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