Question

Prepare the cash budget for the months of april may and june

The following actual and budgeted sales relate to AgriTech Company, a distributor of agricultural products located somewhere in the Midwest. March (actual).... April May. June.. July............................. $50,000 60,000 72,000 90,000 48,000 The company's top executives intend to have 25% of sales as gross margin. Sales are 60% for cash and 40% on credit. Credit sales are collected in the month following sale. The company's inventory manager informs that each month's ending inventory should equal 80% of the following month's budgeted cost of goods sold. One-half of a month's inventory purchases is paid for in the month of purchase; the other half is paid for in the following month. In addition, the following relevant information is also provided. a. Monthly expenses are as follows: commissions, 12% of sales; rent, $2,500 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $900 per month (includes depreciation on new assets). b. Equipment costing $1,500 will be purchased for cash in April. c. The company must maintain a minimum cash balance of $4,000. An open line of credit is available at a local bank. All borrowing is done at the beginning of a month, and all repayments are made at the end of a month. The monthly interest rate is 1%. Interest must be paid at the end of each month based on the total loans outstanding for that month. A snapshot from AgriTech Company's balance sheet as of March 31 is as follows: Cash............................. Accounts receivable....... Inventory Building and equipment, net Accounts payable Common shares ......... Retained earnings... $ 8.000 20,000 36.000 120,000 21,750 150,000 12,250 The accounts receivable at March 31 are a result of March credit sales. The accounts payable at March 31 are the result of March purchases of inventory.

Answer 1

	Agri Tech Company
	Schedule of Expected Cash Collection
	January	February	March	Quarter
Cash Sales	$           36,000.00	$                  43,200.00	$          54,000.00	$ 1,33,200.00
Credit Sales	$           20,000.00	$                  24,000.00	$          28,800.00	$      72,800.00
Total Collection	$           56,000.00	$                  67,200.00	$          82,800.00	$ 2,06,000.00
	January	February	March
Cash Sales	($60000*60%)	($72000*60%)	($90000*60%)
Credit Sales	($60000*40%)	($72000*40%)	($90000*40%)
	Cash collection
	January	February	March
Cash Sales	($60000*60%)	($72000*60%)	($90000*60%)
Credit Sales	$           20,000.00	($60000*40%)	($72000*40%)
	Agri Tech Company
	Mercendise Purchase Budget
	January	February	March	Quarter
Budgeted Cost of goods sold	$           45,000.00	$                  54,000.00	$          67,500.00	$ 1,66,500.00
Add: Desired Ended Inventory	$           43,200.00	$                  54,000.00	$          28,800.00	$ 1,26,000.00
Total Needs	$           88,200.00	$              1,08,000.00	$          96,300.00	$ 2,92,500.00
Less: Beginning Inventory	$           36,000.00	$                  43,200.00	$          54,000.00	$ 1,33,200.00
Required Purchases	$           52,200.00	$                  64,800.00	$          42,300.00	$ 1,59,300.00
	Cost of goods sold
January	($60000*75%)=	45000
February	($72000*75%)=	54000
March	($90000*75%)=	67500
April	($48000*75%)=	36000
Desired Inventory
January	($54000*80%)=	43200
February	($67500*80%)=	54000
March	($36000*80%)=	28800
	Agri Tech Company
	Schedule of Expected Cash Disbursement
	January	February	March	Quarter
December Purchases	$           21,750.00			$      21,750.00
January Purchases	$           26,100.00	$                  26,100.00		$      52,200.00
February Purchases		$                  32,400.00	$          32,400.00	$      64,800.00
March Purchases			$          21,150.00	$      21,150.00
	$           47,850.00	$                  58,500.00	$          53,550.00	$ 1,59,900.00
	Cash Disbursement
	January	February	March
January Purchases	($52200*50%)	($52200*50%)
February Purchases		($64800*50%)	($64800*50%)
March Purchases			($42300*50%)
	Agri Tech Company
	Schedule of Expected Cash Disbursement
	Selling & Administerative Expenses
	January	February	March	Quarter
Commission(Sales*12%)	$              7,200.00	$                    8,640.00	$          10,800.00	$      26,640.00
Rent	$              2,500.00	$                    2,500.00	$            2,500.00	$        7,500.00
Other Exenses(Sales*6%)	$              4,800.00	$                    5,760.00	$            7,200.00	$      17,760.00
Total disbursement	$           14,500.00	$                  16,900.00	$          20,500.00	$      51,900.00
	Agri Tech Company
	Cash Budget
	January	February	March	Quarter
Cash Balance	$              8,000.00	$                    4,150.00	$            4,950.00	$        8,000.00
Cash Collection	$           56,000.00	$                  67,200.00	$          82,800.00	$ 2,06,000.00
Total Cash available	$           64,000.00	$                  71,350.00	$          87,750.00	$ 2,14,000.00
Less: Cash Disbursement
Cash payment to supplier	$           47,850.00	$                  58,500.00	$          53,550.00	$ 1,59,900.00
Commission Paid	$              7,200.00	$                    8,640.00	$          10,800.00	$      26,640.00
Rent Paid	$              2,500.00	$                    2,500.00	$            2,500.00	$        7,500.00
Other Expenses	$              4,800.00	$                    5,760.00	$            7,200.00	$      17,760.00
Equipment Purchased	$              1,500.00			$        1,500.00
Total Cash disbursement	$           63,850.00	$                  75,400.00	$          74,050.00	$ 2,13,300.00
Excess of Deficiency of cash	$                 150.00	$                   -4,050.00	$          13,700.00	$            700.00
Borrowings	$              4,000.00	$                    9,000.00	$                         -	$      13,000.00
Repayment			$           -9,000.00	$      -9,000.00
Interest($4000*1%*3+$9000*1%*2)			$              -300.00	$          -300.00
Total Financing	$              4,000.00	$                    9,000.00	$           -9,300.00	$        3,700.00
Balance	$              4,150.00	$                    4,950.00	$            4,400.00	$        4,400.00