Question

Sushi House has budgeted sales revenue as follows: June July August Credit Sales $85,000 $80,000 $72,000...

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.

Homework Answers

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

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