QUESTION 28 (5 points) In preparation for the quarterly cash budget, the followi

Question

QUESTION 28 (5 points) In preparation for the quarterly cash budget, the following revenue and cost nformation bare been compiled. Prepare and evaluate a cash budget for the month of October based on the information showa below. Month Sales $3,000,000 $4.500,000 $1,000,000 Purchases August (actual) September (actual) October (forecast) $3,500,000 $2,000,000 s 500,000 .The firm collects 60 percent of sales for cash and 40 percent of its sales one month later .The firm pays cash for 40 percent of its purchases .The firm pays for 60 percent of its purchases the followig moath Salaries and wages amount to 15 percent of the preceding month Lease payments of $100,000 must be made each month cales - Depreciation expense each month of $45,000 . The firm has a beginning cash balance in October of $100.000 and mauntains a minimum cash balance of $200,000 CsS

Explanation / Answer

Schedule of Sales Budget Month August September October Quarter Sales 3000000 4500000 1000000 8500000 Schedule of Purchase Budget Month August September October Quarter Sales 3500000 2000000 500000 6000000 Schedule of expected cash collection For the month of Ocotber Month October Cash Sales=($1000000*60%) $         6,00,000.00 September Sales($4500000*40%) $       18,00,000.00 Total Cash collection $       24,00,000.00 Schedule of expected cash payment For the month of Ocotber Month October Cash Purchases=($500000*40%) $         2,00,000.00 September Purchases ($2000000*60%) $       12,00,000.00 Total Cash collection $       14,00,000.00 Months October Cash Balance $         1,00,000.00 Add: Collections from customer $       24,00,000.00 Total Cash available $       25,00,000.00 Less: Disbursement Merchandise Purchase $       14,00,000.00 Salaries & Wages=($4500000*15%) $         6,75,000.00 Lease Payment $         1,00,000.00 Total Cash disbursement $       21,75,000.00 Excess of receipts over Expenditure $         3,25,000.00 Cash Balance ,ending $         3,25,000.00

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