Ryan Richards, controller for Grange Retailers, has assembled the following data
ID: 2484784 • Letter: R
Question
Ryan Richards, controller for Grange Retailers, has assembled the following data to assist in the preparation of a cash budget for the third quarter of 2008. a) May(actual) $100,000. June(actual) $120,000. July(estimated) $90,000. August( estimated) $100,000. September(estimated) $135,000. October(estimated) $110,000 b) Each month, 30 percent of sales are for cash and 70 percent are on credit. The collection patern for cresit sales is 20 percent in the month of sale, 50 percent in the following month, and 30 percent in the second month following the sale. c) Each month, the ending inventory exactly equals 50 percent of the cost of next months sales. The markup on goods is 25 percent of the cost. d) Inventory purchases are paid for in the month following the purchase. e) Recurring monthly expenses are as follows: Salaries and Wages $10,000. Depreciation on plant and equipment $4,000. Utilities $1,000. Other $1,700. f) Property taxes of $15,000 are due and payable on July 15, 2008. g) Advertising fees of $6,000 must be paid on August 20,2008. h) A lease on a new storage facility is scheduled to begin on September 2, 2008. Monthly payments are $5,000. i) The company has a policy to mantain a minimum cash balance of $10,000. If necessary, it will borrow to meet its short term needs. All borrowing is done at the beginning of the month. All payments on principal and interest are made at the end of a month. The annual interest rate is 9 percent. The company must borrow in multiples of $1,000 Prepare a cash budget for each month in the third quarter and for the quarter in total. ( the third quarter begins on July 1.) Provide a supporting schedule of cash collections.
Can you please show how you got certain numbers such as the beginning balance? Thank you!
Explanation / Answer
May June July August September October sales 100000 120000 90000 100000 135000 110000 Cash-30% 30000 36000 27000 30000 40500 33000 Credit-70% 70000 84000 63000 70000 94500 77000 May 20% 50% 30% June 20% 50% 30% July 20% 50% 30% August 20% 50% 30% September 20% 50% 30% October 20% 50% 30% Collection amount May 21000 June 42000 25200 July 12600 31500 18900 August 14000 35000 21000 September 18900 47250 October 15400 Credit sales collection 75600 70700 72800 83650 Cost of sales-125% 80000 96000 72000 80000 108000 88000 Beginning Inventory-50% 40000 48000 36000 40000 54000 44000 Ending Inventory-next month 50% 48000 36000 40000 54000 44000 Inventory purchase 88000 84000 76000 94000 98000 Payment for inventory 88000 84000 76000 94000 98000 Monthly Expenses 12700 12700 12700 12700 12700 12700 property tax 15000 Ad Fees 6000 lease payment 5000 Cash Budget May June July August September October Op Balance of cash 10000 10000 10000 10900 10000 10000 Cash Collection Cash Sales 30000 36000 27000 30000 40500 33000 Credit sales 75600 70700 72800 83650 Total Available Cash 112600 111600 123300 126650 Payment Inventory purchase 84000 76000 94000 98000 Monthly Expenses 12700 12700 12700 12700 property tax 15000 Ad Fees 6000 lease payment 5000 5000 Total Payments 111700 94700 111700 115700 Available cash after payments 900 16900 11600 10950 Borrowing 10000 Interest payment 150 24.375 Principal Repayment 6750 1575.625
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