Sushi House has budgeted sales revenues as follows: Credit sales: June $85,000,
ID: 2353324 • Letter: S
Question
Sushi House has budgeted sales revenues as follows: Credit sales: June $85,000, July $80,000, August $72,000. Cash sales: June $14,000, July $25,000, August $32,000. Total sales: June $99,000, July $105,000, August $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 administrative expenses of $14,000 each month, dividends of $30,000 will be paid in July, and the 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 of each month. The company borrows money from the bank at 9% interest if necessary to maintain the minimum cash balance. 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. Incorporate into your solution appropriate schedules for expected collections from customers and expected payments for purchases of inventory.Explanation / Answer
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
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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