Question

Use the following information to prepare a cash budget for Knightsbridge Corporation for the month of June 2020.

In May, credit sales were $175,000; 80% of this amount is estimated to be collectible in June.

June sales are estimated to be $340,000, all of which are credit sales. Only 20% of credit sales are collected in the month in which the sale is made.

Total fixed expenses are $60,000 per month, including $26,000 depreciation. Variable expenses are 35% of sales. All expenses requiring payment are paid in cash when incurred.

A $40,000 note payable must be paid on June 30.

As of May 31, the cash balance is $94,000.

Answer 1

Schedule of expected cash collection from june

Cash collection from May credit sales (175,000 x 80%)	140,000
Cash collection from june credit sales (340,000 x 20%)	68,000
Total cash collection from customer	$208,000

Cash budget for June

Beginning cash balance	94,000
Cash collection from cutomer	208,000
Total available cash (i)	312,000
Cash payments :
Fixed expenses	34,000
Variable expenses (340,000 x 35%)	119,000
Repayment of note	40,000
Total cash payment (ii)	-193,000
Ending cash balance (i - ii)	$119,000