One store is planning its cash needs for the third quarter of the
year, and the following information is available to assist in
preparing a cash budget. Budgeted income statements for July
through October are as follows:
Additional information follows:
1. Other expenses, which are paid monthly, include $3,500 of
depreciation per month.
2. Sales are 44% for cash and 56% on credit.
3. Credit sales are collected 50% in the month of sale, 35% one
month after sale, and 15% two months after sale.
May sales were $40,000, and June sales were $42,000.
4. Merchandise is paid for 50% in the month of purchase; the
remaining 50% is paid in the following month. Accounts payable for
merchandise at June 30 totaled $12,000.
5. The store maintains its ending inventory levels at 30% of the
cost of goods to be sold in the following month. The inventory at
June 30 is $7,600.
6. An equipment note of $10,000 per month is being paid through
August.
7. The store must maintain a cash balance of at least $10,000 at
the end of each month. The cash balance on June 30 is
$10,000.
8. The store can borrow from its bank as needed. Borrowings and
repayments must be in multiples of $100. All borrowings take place
at the beginning of a month, and all repayments are made at the end
of a month. When the principal is repaid, interest on the repayment
is also paid. The interest rate is 6% per year.
c. Prepare a monthly cash budget for July, August,
and September. Show borrowings from the store’s bank and repayments
to the bank as needed to maintain the minimum cash balance.
Note: Do not use any negative signs with your
answers.
- Assume All Office Depot Stores Do Cash Budgeting Every Quarter One Store Is Planning Its Cash Needs For The Third Quart 1 (52.57 KiB) Viewed 27 times