Built-Tight is preparing its master budget for the quarter ended September 30, 2

Question

Built-Tight is preparing its master budget for the quarter ended September 30, 2017. Budgeted sales and cash payments for product costs for the quarter follow:

Sales are 25% cash and 75% on credit. All credit sales are collected in the month following the sale. The June 30 balance sheet includes balances of $15,000 in cash; $44,900 in accounts receivable; $4,400 in accounts payable; and a $4,900 balance in loans payable. A minimum cash balance of $15,000 is required. Loans are obtained at the end of any month when a cash shortage occurs. Interest is 1% per month based on the beginning-of-the-month loan balance and is paid at each month-end. If an excess balance of cash exists, loans are repaid at the end of the month. Operating expenses are paid in the month incurred and consist of sales commissions (10% of sales), office salaries ($3,900 per month), and rent ($6,400 per month).

(1) Prepare a cash receipts budget for July, August, and September.

July August September Budgeted sales $ 58,500 $ 74,500 $ 53,500 Budgeted cash payments for Direct materials 16,060 13,340 13,660 Direct labor 3,940 3,260 3,340 Factory overhead 20,100 16,700 17,100

Explanation / Answer

SOLUTION

BUILT-TIGHT

Cash Receipts Budget

For July, August, and September

July ($) August ($) September ($) Sales 58,500 74,500 53,500 Less: Ending Accounts receivable (75%) 43,875 55,875 40,125 Cash receipts from   Cash sales (25% of sales) 14,625 18,625 13,375   Collections of prior month's receivables 44,900 43,875 55,875 Total cash receipts 59,525 62,500 69,250

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