Eddie\'s Bar and Restaurant Supplies expects its revenues and payments for the f

Question

Eddie's Bar and Restaurant Supplies expects its revenues and payments for the first part of the year to be:

Sales payments
January $24,000 $18,000
February $20,000 $21,300
March $35,000 $19,100
April $22,000 $22,400
May $28,000 $14,700

Eighty percent of the firm's sales are on credit. Past experience shows that 40 percent of accounts receivable are collected in the month after sale, and the remainder is collected in the second month after sale. Prepare a schedule of cash receipts for March, April and May. Eddie's pays its payments in the following month. Eddie's had a cash balance of $2,000 on March 1, which is also its minimum required cash balance. There is an outstanding loan of $6,000 on March 1. Prepare a cash budget for March, April, and May.

Explanation / Answer

jan FEB March APRIl May

Sales 24,000   20,000 35,000 22,000   28,000

opeing balance 2000 2000 2000

20% of Sales 7000 4400 5600

40% of recivables 6400 11200 7040

60% of recivables 11520 10560 16800

Total 26920 28160 31440

Payments 21,300   19,100   22,400

Cash balance 5620 9060 9040

o/s loan   6,000

Repayment loan 6000

Total Cash 11620 3060 9040   

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