Question

Cash budget-Basic Grenoble Enterprises had sales of $50,400 in March and $60,200 in April. Forecast sales for May, June, and July are $69,500, $80,200, and $100,300, respectively. The firm has a cash balance of $4,500 on May 1 and wishes to maintain a minimum cash balance of $4,500. Given the following data, prepare and interpret a cash budget for the months of May, June, and July (1) The firm makes 23% of sales for cash, 65% are collected in the next month, and the remaining 12% are collected in the second month following sale. (2) The firm receives other income of $2,300 per month. (3) The firm's actual or expected purchases, all made for cash, are $49,700, $69,500, and $79,800 for the months of May through July, respectively. (4) Rent is $3,500 per month. (5) Wages and salaries are 11% of the previous month's sales. (6) Cash dividends of $3,400 will be paid in June. (7) Payment of principal and interest of $3,500 is due in June. (8) A cash purchase of equipment costing $6,400 is scheduled in July (9) Taxes of $6.500 are due in June

Answer 1

	March	April	May	June	July
Sales	$50,400	$60,200	$69,500	$80,200	$100,300
Cash sales (0.23)	$11,592	$13,846	$15,985	$18,446	$23,069
Lag 1 month (0.65)			$39,130	$45,175	$52,130
Lag 2 months (0.12)			$6,048	$7,224	$8,340
Other income			$2,300	$2,300	$2,300
Total cash receipts			$63,463	$73,145	$85,839
Disbursements
Purchases			$49,700	$69,500	$79,800
Rent			$3,500	$3,500	$3,500
Wages & salaries			$6,622	$7,645	$8,822
Dividends				$3,400
Principal & interest				$3,500
Purchase of new equipment					$6,400
Taxes due				$6,500
Total cash disbursements			$59,822	$94,045	$98,522
Total cash receipts			$63,463	$73,145	$85,839
Total cash disbursements			$59,822	$94,045	$98,522
Net cash flow			$3,641	($20,900)	($12,683)
Add: Beginning cash			$4,500	$8,141	($12,759)
Ending cash			$8,141	($12,759)	($25,442)
Minimum cash			$4,500	$4,500	$4,500
Required total financing(Notes Payable)				$17,259	$29,942
Excess cash balance(Marketable Securities)			$3,641