Question

Arial 11 • Α Α΄ 11 BI U QAEE pboard KI Font 12 Aligr -4 X ✓ fx A 00 с D E F G The cash balance on June 1 is $33,000 Actual sales for May and estimated sales for June are as follows: May June Cash sales $ 40.000 $ 50,000 Credit sales $ 410.000 $ 350.000 Total sales $450,000 $400,000 Credit sales are collected over a two-month period based on the following estimates: 30% collected in the month of the sale and 70% collected in the month following the sale. 3 3 Purchases of inventory will total $265,000 for June. 60% of the purchase is paid during the month of the purchase, and the remaining 40% is paid in the month following the purchase. The accounts payable remaining from May's inventory purchases total $75,000, and all of it will be paid in June. Variable selling and administrative expenses are budgeted to be 20% of the month's sales revenue. Fixed selling and administrative expenses are budgeted to be $72,000 for June. and this amount already includes $14,000 for monthly depreciation. A purchase of equipment with cash that costs $84.000 is planned near the end of June. Cash dividends of $18,000 will be paid during June 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 The company maintains a minimum cash balance of $30.000. An open line of credit of up to $300.000 is available from the company's bank as needed. On June 1. there were no borrowings on this line of credit Instructions: Prepare a cash budget for the month of June. Indicate in the financing section any borrowing that will be needed during the month. Assume that any interest will not be paid until the following month Utilize the table below to complete your cash budget with descriptions and amounts. Then answer the questions listed after that related to financial statement amounts

Answer 1

cash budget:

cash budget for the month ended june 30
	amount($)
cash balance , june 1	33000
cash collections	442000
Total cash available	475000
cash disbursements:
payment for purchase of inventory	234000
selling and administrative expenses	138000
equipment purchases	64000
dividends	18000
Total cash disbursements	454000
Excess(deficiency)of cash available	21000
financing:
borrowing on line-of-credit	9000
cash balance,june 30	30000

note:1) cash collection schedule

particulars	may	june
credit sales	410000	350000
collections:
30% in the month of sale	123000	105000
70% in the following month		287000
add:cash sales	40000	50000
Total collections	163000	442000

cash payment schedule:

particulars	june
total credi purchase made in june	265000
payment:
60% during the month	159000
paid for may purchase	75000
Total payments	234000

the depreciation is a non cash item and hence excluded from the fixed costs.

income statement amounts

sales revenue	$400000
selling and administrative expenses	$152000

calculation:

1) sales revenue=cash sale+credit sale=50000+350000=$400000

2) selling and administrative expenses includes both variable and fixed=20% x 400000+72000=$152000.

Balance sheet amounts

cash	$30000
accounts receivable	$245000
accounts payable	$106000
ending retained earnings	$357000

calculations:

1) cash balance is the minimum amount as per company's policy.

2) accounts receivable=70% of credit sale of june=$350000x70%=$245000

3) accounts payable=40% of june credit purchase=40%x$265000=$106000

4) ending retained earnings=beginning retained earnings+net income of the current year-dividend of the current year

ie $280000+$95000-$18000=$357000.