Question

Develop a cash budget for the next two months using the information provided below

Monthly sales forecast are $210,000 and $30,000 for the next two months
The current month's sales were $140,000
80% of sales are collected in the month of sale, with the remainder collected in the following month
Cost of goods sold equal 70% of sales
The monthly lease payment is $75,000
The cash position at the end of the current month is $70,000
The target cash balance is $40,000 Sales forecast Receipts Cash Sales Collections on Credit Sales Total Receipts Disbursements Cost of Goods Sold Lease Payment Total Disbursements Net Cash Flow Beginning Cash Position Ending Cash Position Target Cash Balance Surplus (Deficit)

Answer 1

Cash budget

Particulars	Month 1	Month 2
Sales Forecast	$210,000	$30,000
Receipts
Cash Sales [80% of current sales]	$210,000 x 80% = $168,000	$30,000 x 80% = $24,000
Collections of credit sales [20% of previous month sales]	$140,000 x 20% = $28,000	$210,000 x 20% = $42,000
Total receipts (a)	$196,000	$66,000
Disbursements
Cost of goods sold (70% of sales)	70% x $210,000 = $147,000	$30,000 x 70% = $21,000
Lease payments	$75,000	$75,000
Total Disbursements (b)	$222,000	$96,000
Net Cash Flow (a - b)	(-)$26,000	(-)$30,000
Add: Beginning cash position	$70,000	$44,000
Ending cash position	$44,000	$14,000
Target cash balance	$40,000	$40,000
Surplus (Deficit)	$4,000	($26,000)