Question

Grenoble Enterprises had sales of $ 49 comma 700 in March and $ 60 comma 100...

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.

Homework Answers

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)

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