Question

The accountant for Rundle’s Dress Shop prepared the following cash budget. Rundle’s desires to maintain a cash cushion of $16,000 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 2 percent per month.

Required

1. Complete the cash budget by filling in the missing amounts.

2. Determine the amount of net cash flows from operating activities Rundle’s will report on the third quarter pro forma statement of cash flows.

3. Determine the amount of net cash flows from financing activities Rundle’s will report on the third quarter pro forma statement of cash flows.

Complete the cash budget by filling in the missing amounts. (Any shortages or repayments should be indicated with a minus sign. Round your answers to the nearest whole dollar amount.)

Cash Budget July August September Section 1: Cash receipts Beginning cash balance $48,500 Add cash receipts 192,000 212,000 252,600 Total cash available 240,500 Section 2: Cash payments For inventory purchases 171,526 146,230 180,152 For S&A expenses 60,500 66,560 67,432 For interest expense 0 Total budgeted disbursements 232,026 Section 3: Financing activities Surplus (shortage) 8,474 Borrowing (repayments) 7,526 Ending cash balance $16,000 $16,000 $16,000

Determine the amount of net cash flows from both operating and financing activities Rundle's will report on the third quarter pro forma statement of cash flows. (Round intermediate calculations and final answers to the nearest whole dollar amount.)

	b. Net cash (operating activities) c. Net cash (financing activities)

Answer 1

		Cash Budget	July	August	September
	A	Beginning cash balance	$48,500	$16,000	$16,000
	B	Add cash receipts	$192,000	$212,000	$252,600
	C=A+B	Total cash available	$240,500	$228,000	$268,600
		Section 2: Cash payments
	D	For inventory purchases	$171,526	$146,230	$180,152
	E	For S&A expenses	$60,500	$66,560	$67,432
	F	For interest expense	$0	$151	$19
	G=D+E+F	Total budgeted disbursements	$232,026	$212,941	$247,603
		Section 3: Financing activities
	H=C-G	Surplus (shortage)	$8,474	$15,059	$20,997
	I	Minimum Cash Balance	$16,000	$16,000	$16,000
	J=I-H	Borrowing (repayments)	$7,526	$941	-$4,997
		Ending cash balance	$16,000	$16,000	$16,000
		Interest expense in August	$151	(2%*7526)
		Interest expense in September	$19	(2%*941)
		Net Cash Operating Activities
				July	August	September	Total
	K	Cash Receipts		$192,000	$212,000	$252,600	$656,600
		Cash Payment :
	L	For inventory purchases		$171,526	$146,230	$180,152	$497,908
	M	For S&A expenses		$60,500	$66,560	$67,432	$194,492
	N=L+M	Total Operating Cash Expenses		$232,026	$212,790	$247,584	$692,400
	P=K-N	Net Cash Operating Activities		-$40,026	-$790	$5,016	-$35,800
		Net Cash (Operating Activities) for the quarter	-$35,800
		Net Cash Financing Activities		July	August	September	Total
	Q	Borrowing (repayments)		$7,526	$941	-$4,997	$3,469
	R	Interest expense		$0	-$151	-$19	-$169
	S=Q+R	Net Cash Financing Activities		$7,526	$790	-$5,016	$3,300
		Net Cash (Financing Activities) for the quarter	$3,300