Question

Grenoble Enterprises had sales of $ 49 comma 700 in March and $ 60 comma 100 in April. Forecast sales for May, June, and July are $ 69 comma 700 , $ 80 comma 500 , and $ 99 comma 600 , respectively. The firm has a cash balance of $ 5 comma 100 on May 1 and wishes to maintain a minimum cash balance of $ 5 comma 100. Given the following data, prepare and interpret a cash budget for the months of May, June, and July. (1) The firm makes 17 % of sales for cash, 65 % are collected in the next month, and the remaining 18 % are collected in the second month following sale. (2) The firm receives other income of $ 1 comma 700 per month. (3) The firm's actual or expected purchases, all made for cash, are $ 50 comma 100 , $ 70 comma 300 , and $ 79 comma 500 for the months of May through July, respectively. (4) Rent is $ 3 comma 500 per month. (5) Wages and salaries are 10 % of the previous month's sales. (6) Cash dividends of $ 3 comma 500 will be paid in June. (7) Payment of principal and interest of $ 3 comma 800 is due in June. (8) A cash purchase of equipment costing $ 6 comma 300 is scheduled in July. (9) Taxes of $ 6 comma 500 are due in June.

Answer 1

Cash Budget will be as follows:

	May	June	July
Beginning Cash Balance	5,100	7,050	(16,012)
Add: Cash Receipts
Cash Sales (17%)	11,849	13,685	16,932
Received in Net month (65%)	39,065	45,305	52,325
Collected in Second month (18%)	8,946	10,818	12,546
Other Income	1,700	1,700	1,700
Total Cash Available	66,660	78,558	67,491
Less: Cash Payments
Purchases	50,100	70,300	79,500
Rent	3,500	3,500	3,500
Wages and Salaries	6,010	6,970	8,050
Cash Dividends		3,500
Payment of principal and interest		3,800
Purchase of Equipment			6,300
Taxes		6,500
Total Cash payments	59,610	94,570	97,350
Ending Balance	7,050	(16,012)	(29,859)