The accountant for Lori\'s Dress Shop prepared the following cash budget. Lori\'

Question

The accountant for Lori's Dress Shop prepared the following cash budget. Lori's desires to maintain a cash cushion of $14,000 at the end of each month. Funds are assumed to be borrowed and repaid on the last day of each month. Interest is charged at the rate of 2% per month.

Cash Budget JUL AUG SEP
section 1: cash receipts
beginning cash balance $43,000 $? $?
add cash receipts 183,000 196,000 240,000
total cash available (a) 226,000 ? ?

section 2: cash payments
for inventory purchases 163,646 139,900 172,474
for s&a expenses 54,000 62,060 61,536
for interest expense 0 ? ?
total budgeted disburements (b) 217,646 ? ?

section 3: financing activities
surplus (shortage) 8,354 ? ?
borrowing (repayments) (c) 5,646 ? ?
ending cash balance (a- b + c) $14,000 $14,000 $14,000

Required
a. Complete the cash budget by filling in the missing amounts. Round all computations to the nearest whole dollar.
b. Determine the amount of net cash flows from operating activities Lori's will report on the third quarter pro forma statement of cash flows.
c. Determine the amount of net cash flows from financing activities Lori's will report on the third quarter pro forma statement of cash flows.

Explanation / Answer

CASH BUDGET July Aug Sep Total Beginning cash balance $43,000 14,000 14,000 Add:Cash receipts 183,000 196,000 240,000 619,000 Total available cash 226,000 210,000 254,000 Less:Cash disbursements 217,646 201,436 234,010 653,092 Excess(deficiency) of 8,354 8,564 19,990 available cash over disburse- ments Financing activities Surplus 8,354 8,564 19,990 Add:Borrowings 5,646 11,091 8,881 14,000 19,655 Less:Repayments with interest 0 5,655 11,109 5,646+9 11,091+18 Ending cash balance 14,000 14,000 14,000 5,646*0.02/12 /12=9 11,091*0.02/12=18 b) Cash flows from operaing activities Cash receipts from operating activities 619,000 Cash payments from operating activities -653,092 Net cash provided by operating activities(34,092) c) Cash flows from financing activities    Borrowings $11,109

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