2. The following information is budgeted for McCracken Plumbing Supply Company f

Question

2. The following information is budgeted for McCracken Plumbing Supply Company for next quarter: April MayJune $115,000 $130,000 $180,000 103,850 $92,000 $105,000 $51,000 $52,000 $53,000 Sales Merchandise purchases Selling and administrative expenses. All sales at McCracken are on credit. Forty percent are collected in the month of sale, 57% in the month following the sale, and the remaining 3% are uncollectible. Merchandise purchases are paid in full the month following the month of purchase. The selling and administrative expenses above include S9,500 of depreciation on display fixtures and warehouse equipment. All other selling and administrative expenses are paid in the month incurred. McCracken wants to maintain a cash balance of $16,000. 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. Required: Prepare McCracken's cash budget for the month of May. McCracken expects to have $24,950 of cash on hand at the beginning of May. (4 points)

Explanation / Answer

May beginning cash 24950 Sources of cash: Account receivable collected 117550 (0.57*115000)+(0.4*130000) Depreciation 9500 added back as non cash expense Borrowing from bank 20000 borrowing in increments of 1000 Total cash available 172000 (A) Uses Of cash Merchandise Purchases 103850 selling and administrative expenses 52000 Total Uses of cash 155850 (B) Net Cash Position ( A-B) 16150

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