Please help me answer this question The following Information is budgeted for Mc

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Please help me answer this question

The following Information is budgeted for McCracken Plumbing Supply Corporation for next quarter. All sales at McCracken are on credit Forty percent are collected in the month of sale, 58% in the month following the sale, and the remaining 2% are uncollectible. Merchandise purchases are paid in full the month following the month of purchase. The selling and administrative expenses above include $8,000 of depreciation on display fixtures and warehouse equipment. All other selling and administrative expenses are paid as incurred. McCracken wants to maintain a cash balance of $15,000. Any amount below this can be borrowed from a local bank as needed in increments of $1,000. All borrowings are made at month end. Prepare McCracken's cash budget for May. McCracken expects to have $24,000 of cash on hand at the beginning of May.

Explanation / Answer

Cash Budget for the month

52,000

Since, the deficit for making the minimum balance is 9,200 but bank will loan the amount in terms of $1,000. So, we have to take $10,000 from bank as loan.

Expected Cash Balance 24,000 Sales from April (58% of 110,000) 63,800 Sales from May (40% of 130,000)

52,000

Loan from bank 10,000 Less : Merchandise Purchased 92,000 Less : Selling And Administrative Exenses (50,000-8,000) 42,000 Closing Balance 15,800

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