Question

Sushi House has budgeted sales revenue as follows:

	June	July	August
Credit Sales	$85,000	$80,000	$72,000
Cash Sales	14,000	25,000	32,000
Total Sales	$99,000	$105,000	$104,000

Past experience indicates that 70% of the credit sales will be collected in the month of sale and the remaining 30% will be collected in the following month. Purchases of inventory are all on credit and 60% is paid in the month of purchase and 40% in the month following purchase.

Budgeted inventory purchases are:

June	$45,000
July	43,000
August	40,000

Other cash disbursements budgeted: Selling and administration expenses of $14,000 each month, Dividends of $30,000 will be paid in July, and purchase of a computer in August for $3,000 cash. The company wishes to maintain a minimum cash balance of $20,000 at the end each month. The company borrows money from the bank at 9% interest if necessary to maintain the minimum cash balance and must be paid each month whether there is a loan repayment for not. Borrowed money is repaid in months when there is an excess cash balance. The beginning cash balance on July 1 was $25,000. All amounts borrowed during a month are borrowed on the first day. The loan balance as of July 1 is $26,000.

Instructions:

Prepare a cash budget for the month of July. Prepare separate schedules for expected collections from customers and expected payments for purchases as inventory.

Answer 1

July Cash Budget
Beginning cash balance				25,000
Add: Receipts
expected collections from customers:
Cash Sales in July	25,000
Credit Sales in July	56,000
Credit Sales in June	25,500
Total receipts				106,500
Less: Disbursements
expected payments for purchases of inventory:
inventory purchases for July	25,800
inventory purchaes for June	18,000
			43,800
selling and admin			14,000
dividends			30,000
Total disbursements				87,800
Excess(deficiency) of available cash over disbursements				43,700
financing
borrowings				0
repayments				23,505
interest				195
cash balance, ending				20,000