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 20% cash and 80% 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; $44,600 in accounts receivable; $4,100 in accounts payable; and a $4,600 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 ($3,600 per month), and rent ($6,100 per month).

(2) Prepare a cash budget for each of the months of July, August, and September. (Negative balances and Loan repayment amounts (if any) should be indicated with minus sign. Enter your final answers in whole dollars.)

July August September Budgeted sales $ 57,000 $ 73,000 $ 55,000 Budgeted cash payments for Direct materials 15,760 13,040 13,360 Direct labor 3,640 2,960 3,040 Factory overhead 19,800 16,400 16,800

Explanation / Answer

Solution:-

Working note:-

1.

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Built-Tight Company Cash budget For the month of july, august and september July August September Beginning cash balance 15,000 15,000 22,522 Cash receipts (working note 1) 56,000 60,200 69,400 Total cash available 71,000 75,200 91,922 Cash destribution: Cash payment for material 15,760 13,040 13,360 Cash payment for labor 3,640 2,960 3,040 Cash payment for factory overhead 19,800 16,400 16,800 Sales commission 10% of sales 5,700 7,300 5,500 Office salaries 3,600 3,600 3,600 Rent 6,100 6,100 6,100 Interest on bank loan 46 32 0 Premilinary cash balance 16,345 25,768 43,522 Additional loan from bank 0 0 0 Repayment of loan to bank 1,354 3,246 0 Ending cash balance 15,000 22,522 43,522

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