Question

Cash budget-Basic.

Grenoble Enterprises had sales of $50,000 in March and $60,400 in April. Forecast sales for​ May, June, and July are $69,900​, $79,600​, and ​$100,300, respectively. The firm has a cash balance of $4,500 on May 1 and wishes to maintain a minimum cash balance of $4,500. Given the following​ data, prepare and interpret a cash budget for the months of​ May, June, and July. ​

(1) The firm makes 18% of sales for​ cash, 62% are collected in the next​ month, and the remaining 20% are collected in the second month following sale.  

​(2) The firm receives other income of $2,300 per month.  

​(3) The​ firm's actual or expected​ purchases, all made for​ cash, are ​$50,400, $70,500​, and $80,200 for the months of May through​ July, respectively.   ​

(4) Rent is $2,500 per month.   ​

(5) Wages and salaries are 9% of the previous​ month's sales.   ​

(6) Cash dividends of $2,700 will be paid in June.   ​

(7) Payment of principal and interest of $4,000 is due in June.  

​(8) A cash purchase of equipment costing $5,900 is scheduled in July.  

​(9) Taxes of $6,000 are due in June.

Complete the first month of the cash budget for Grenoble Enterprises​ below: ​(Round to the nearest dollar. Please input all the values in the table before checking your​ answers.)

Answer 1

	March	April	May
sales	50000	60400	69900
Cash Budget		May
beginning cash balance		4500
cash collection:
18% of month sales	69900*18%	12582
62% first month after sale	60400*62%	37448
20% in second month following sale	50000*20%	10000
other income		2300
total cash collection		62330
total cash available		66830
cash payment
Purchases		50400
rent expense		2500
wages and salaries	9% of previous month sale = 60400*9%	5436
total of cash payment		58336
excess of cash over expenditure	66830-58336	8494
Minimum balance of cash		4500
cash balance after minimum balance of cash		3994