Question

The accountant for Perez's Dress Shop prepared the following cash budget. Perez's desires to maintain a cash cushion of $15,000 at the end of each month. Funds are assumed to be borrowed and repaid on the last day of each month. Interest is charged at the rate of 1 percent per month. Required a. Complete the cash budget by filling in the missing amounts. b. Determine the amount of net cash flows from operating activities Perez's will report on the third quarter pro forma statement of cash flows. c. Determine the amount of net cash flows from financing activities Perez's will report on the third quarter pro forma statement of cash flows.

Answer 1

Solution a:  

B Perez's Dress shop Cash Budget July August September $ 48,000 $191,000 $239,000 $15,000 $211,000 $226,000 $15,000 $251,600 $266,600 11 12 Section 1 Cash Receipts: Beginning Cash Balance Add: Cash receipts Total cash available Section 2: Cash Payments: For Inventory Purchases For S&A Expenses For Interest Expense Total Budgeted Disbursements Section 3: Financing Activities: Surplus (Shortages) Borrowings (repayments) Ending cash balance $171,026 $60,000 $0 $231,026 $145,730 $66,060 $70 $211,860 $179,652 $66,932 $79 $246,663 13 14 17 $7,974 $7,026 $15,000 $14,140 $860 $15,000 $19,937 -$4,937 $15,000 18 22 23 24 25 26 27 29 33 34 35 36 44 45 Sheet194 (3) Sheet338 Sheet146 (2) Sheet146 (3) She

Solution b:

Net cash (operating activities) = Total cash receipts - Total cash disbursements

= (191000+211000+251600) - (231026+211860+246663)

= - $35,949 (Outflow)

Solution c:

Net cash (financing activities) = 7026+860 - 4937 = $2949 (Inflow)