Question

Cash Budget

Janet Wooster owns a retail store that sells new and used sporting equipment. Janet has requested a cash budget for October. After examining the records of the company, you find the following:

1. Cash balance on October 1 is $1,110.
2. Actual sales for August and September are as follows:

   		August		September
   Cash sales		$6,000		$4,500
   Credit sales		58,000		62,000
   Total sales		$64,000		$66,500

3. Credit sales are collected over a three-month period: 40 percent in the month of sale, 36 percent in the next month, and 22 percent in the second month after the sale. The remaining sales are uncollectible.
4. Inventory purchases average 70 percent of a month’s total sales. Of those purchases, 45 percent are paid for in the month of purchase. The remaining 55 percent are paid for in the following month.
5. Salaries and wages total $3,850 per month.
6. Rent is $3,150 per month.
7. Taxes to be paid in October are $1,635.
8. Janet usually withdraws $3,500 each month as her salary.
9. Advertising is $1,500 per month.
10. Other operating expenses total $3,800 per month.
11. Internet and telephone fees are $340 per month.

Janet tells you that she expects cash sales of $5,000 and credit sales of $64,000 for October. She likes to have $3,000 on hand at the end of the month and is concerned about the potential October ending balance.

Required:

Prepare a cash budget for October. Include supporting schedules for cash collections and cash payments. Round your intermediate computations and final answers to the nearest dollar.

Wooster Sporting Goods Store
Cash Budget
For the Month of October
Beginning cash balance	$
Collections:
Cash sales
Credit sales:
October
September
August
Total cash available		$
Disbursements:
Inventory purchases:
October	$
September
Salaries and wages
Rent
Taxes
Other operating expenses
Owner withdrawal
Advertising
Internet and telephone
Ending cash balance		$

Answer 1

Answer:

Schedule of cash budget for October:

Cash Budget

For the Month of October

	Amount
Beginning cash balance	$1,110
Collections:
Cash Sales	$5,000
Credit Sales:
October ($64,000 x 40%)	$25,600
September ($62,000 x 36%)	$22,320
August ($58,000 x 22%)	$12,760
Total cash available	$66,790
Disbursements:
Inventory purchases:
October ($69,000 x 70% x 45%)	$21,375
September ($66,500 x 70% x 55%)	$25,603
Salaries & wages	$3,850
Rent	$3,150
Taxes	$1,635
Other operating expenses	$3,800
Owner withdrawal	$3,500
Advertising	$1,500
Internet & telephone	$340
Total cash payments	$64,753
Ending cash balance	$2,037