Assume the following information for the month of August. June sales = $40,000;

Question

Assume the following information for the month of August. June sales = $40,000; July sales = $65,000; August sales = $52,850. All sales are on account and are collected as follows: 20% in the current month, 50% in the month following, 25% in the second month following, and 5% uncollectible. The beginning cash balance is $14,670, with cash payments of $24,653. If the minimum cash balance is $50,000, what is the amount needed by the bank, or how much is available to pay towards the bank loan? Show the amount needed as a positive number, and the amount to repay a loan as a negative number.

Explanation / Answer

Cash budget for the month of August Particulars Amount $ Opening balance        14,670 Receipts: Aug sale=52,850*20%        10,570 Jul Sale=65,000*50%        32,500 Jun sale=40,000*25%        10,000        53,070 Payments cash payments        24,653 Closing balance        43,087 Minimum cash balance maintained        50,000 Amount to be borrowed           6,913

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