Cash budget-Basic Grenoble Enterprises had sales of S50,300 in March and $60,200

Question

Cash budget-Basic Grenoble Enterprises had sales of S50,300 in March and $60,200 in April. Forecast sales for May, June, and July are S70,500, S79,700, and $100,000, respectively. The firm has a cash balance of $4,600 on May 1 and wishes to maintain a minimum cash balance of $4,600. Given the following data, prepare and interpret a cash budget for the months of May, June, and July. (1 The firm makes 15% of sales for cash, 59% are collected in the next month, and the remaining 20% are colected in e second month folowing sale (2) The firm receives other income of $2,400 per month (3) The firm's actual or expected purchases, all made for cash, are $49,700, $69,900, and $79,700 for the months of May through July, respectively. (4) Rent is S3,500 per month (5) Wages and salaries are 9% of the previous month's sales (6) Cash dividends of $3,300 will be paid in June (7) Payment of principal and interest of S4,100 is due in June (8) A cash purchase of equipment costing $6,500 is scheduled in July. (9) Taxes of $5,600 are due in June

Explanation / Answer

credit line should the firm establish $18190

March April May June July Sales receipts $50,300 $60,200 $70,500 $79,700 $100,000 Percentages: Cash Sales $10,575 $11,955 $15,000 Lag 1 mo. $35,518 $41,595 $47,023 Lag 2 mo. $13,078 $15,652 $18,330 Other income $2,400 $2,400 $2,400 Total cash receipts $61,571 $71,602 $82,753 CASH DISBURSEMENTS SCHEDULE: May June July Disbursements: Purchases $49,700 $69,900 $79,700 Rent $3,500 $3,500 $3,500 Wages & salaries $5,418 $6,345 $7,173 Dividends $0 $3,300 $0 Principal & Interest $0 $4,100 $0 Purchase of new equipment $0 $0 $6,500 Taxes due $0 $5,600 $0 Total cash disbursements $58,618 $92,745 $96,873 CASH BUDGET: May June July Total cash receipts $61,571 $71,602 $82,753 Total cash disbursements $58,618 $92,745 $96,873 Net cash flow $2,953 ($21,143) ($14,120) Add: Beginning cash $4,600 $7,553 $4,600 Ending cash $7,553 ($13,590) ($9,520) Minimum cash $4,600 $4,600 $4,600 Required total financing $0 $18,190 14120 Excess cash balance $2,953 $0 0

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