Cruises, Inc. has budgeted sales revenues as follows: June July August September
ID: 2529630 • Letter: C
Question
Cruises, Inc. has budgeted sales revenues as follows:
June
July
August
September
Credit sales ($)
135,000
125,000
$ 90,000
120,000
Cash sales ($)
90,000
255,000
195,000
175,000
Total sales ($)
225,000
380,000
285,000
295,000
Purchases ($)
300,000
240,000
205,000
185,000
Past experience indicates that 60% of the credit sales will be collected in the month of sale and 20% will be collected in the following month and the remaining 20% after two months. Purchases of inventory are all on credit and 50% is paid in the month of purchase and 50% in the month following purchase. Other cash disbursements budgeted: (a) selling and administrative expenses of $48,000 each month, (b) dividends of $103,000 will be paid in July, and (c) purchase of equipment in August for $30,000 cash and (d) sale of old furniture for $ 2,000 in September.
The company wishes to maintain a minimum cash balance of $50,000 at the end of each month. The company borrows money from the bank at 6% interest if necessary to maintain the minimum cash balance. Borrowed money is repaid in months when there is an excess cash balance. The beginning cash balance on July 1 was $50,000. Assume that borrowed money, in this case, is for one month.
Instructions
Prepare a cash budget for the months of July, August, and September. Prepare separate schedules for expected collections from customers and expected payments for purchases of inventory.
Please follow the format on the next page for answering this question
CRUISES, INC.
Cash Budget
For the Months of July, August, and September
July August September
Beginning cash balance
Add: Receipts
Collections from customers
Cash sales
Total receipts
Total available cash
Less: Disbursements
Purchases
Selling and administrative expenses
Dividends
Equipment purchase
Total disbursements
Excess (deficiency) of available cash over disbursements
Financing
Borrowings
Repayments
Ending cash balance
June
July
August
September
Credit sales ($)
135,000
125,000
$ 90,000
120,000
Cash sales ($)
90,000
255,000
195,000
175,000
Total sales ($)
225,000
380,000
285,000
295,000
Purchases ($)
300,000
240,000
205,000
185,000
Explanation / Answer
Calculation of cash collection from debtors -
2. Calculation of cash disbursement -
3. Calculation of Cash budget -
Please comment in case of further clarification required.
june July August September Credit sale 135000 125000 90000 120000 60% sale 81000 75000 54000 72000 20% collected in following month 27000 25000 18000 20 % collected in 2nd month 27000 Total Cash collection from debtors 102000 79000 117000Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.