Question

QUESTION 1 The city of Charleston had the following sales of water for the selected months of 2017: Month Sales $60,000 February 45,000 March April 60,000 42,500 Мay June 100,000 July 120,000 All sales are on credit. Historically, 60 percent is collected in the month of sale, 30 percent during the first month following the sale, and 10 percent in the second month following the sale. Water purchases by month are as follows: Month $60,000 February March 40,000 April 45,000 Мay 59,750 June 52,500 July 90,000

Answer 1

Solution Requirement : Prepare a cash budget for April, May, June and in for the quarter June $10,500 $78,750 $89,250 Quarter $5,000 $182,250 $187,250 Cash Budget For the April, May, June and for the quarter April May Beginning cash balance $5,000 $ 10,500 Add: Collections from customers (WN-1) $55,500 $48,000 Total cash available $60,500 $58,500 Less: Cash disbursements: Water disbursements ($40,000) ($45,000)| Operating Costs ($10,000) ($10,000) Total cash disbursements ($50,000)| ($55,000) Excess (deficiency) of cash available over disbursements $10,500 $3,500 Financing: Borrowings $0 $7,000 Repayments $0 Interest ($7,000 x 15% x 2/12) $0 $0 Total financing $0 $7,000 Ending cash balance $10,500 $10,500 ($59,750)| ($10,000)| ($69,750)| $19,500 ($144,750) ($30,000) ($174,750) $12,500 $0 $01 ($7,000) ($175) ($7,175) $12,325 $7,000 ($7,000) ($175) ($175) $12,325 Beginning Cash Balance Cash Collections Water disbursements Operating Costs Borrowings Repayments Interest Ending cash balance April $5,000 $55,500 ($40,000) ($10,000) $0 $0 May $10,500 $48,000 ($ 45,000) ($10,000) $7,000 $0 June $10,500 $78,750 ($59,750) ($10,000) sol ($7,000) ($175) $12,325 Quarter $5,000 $182,250 ($144,750) ($30,000) $7,000 ($7,000) ($175) $12,325 $o $10,500 $10,500 WN-1: Schedule of Expected cash collections, by month and in total Schedule of Expected Cash collections April May June Quarter $6,000 Sol $ol $6,000 $13,500 $13,500 $4,500 $4,500 $36,000 February Sales - Collection in April ($60,000 x 10%) March Sales - Collection in April ($45,000 x 30%) - Collection in May ($45,000 x 10%) April Sales - Collection in April ($60,000 x 60%) - Collection in May ($60,000 x 30%) - Collection in June ($60,000 x 10%) May Sales - Collection in May ($42,500 x 60%) - Collection in June ($42,500 x 30%) June Sales - Collection in June ($ 100,000 x 60%) Total cash collections $18,000 $36,000 $18,000 $6,000 $6,000 $25,500 $25,500 $12,750 $12,750 $60,000 $78,750 $60,000 $182,250 $55,500 $48,000