Preparing a cash budget
The accountant for Teresa’s Dress Shop prepared the following cash budget. Teresa’s desires to maintain a cash cushion of $14,000 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.
Cash Budget | July | August | September |
Section 1: Cash receipts |
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Beginning cash balance | $ 42,500 | $ ? | $ ? |
Add cash receipts | 180,000 | 200,000 | 240,600 |
Total cash available (a) | 222,500 | ? | ? |
Section 2: Cash payments |
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For inventory purchases | 165,526 | 140,230 | 174,152 |
For S&A expenses | 54,500 | 60,560 | 61,432 |
For interest expense | 0 | ? | ? |
Total budgeted disbursements (b) | 220,026 | ? | ? |
Section 3: Financing activities |
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Surplus (shortage) | 2,474 | ? | ? |
Borrowing (repayments) (c) | 11,526 | ? | ? |
Ending cash balance (a - b + c) | $ 14,000 | $ 14,000 | $ 14,000 |
Required
a.Complete the cash budget by filling in the missing amounts. Round all computations to the nearest whole dollar.
b. Determine the amount of net cash flows from operating activities Teresa’s will report on the third quarter pro forma statement of cash flows.
c. Determine the amount of net cash flows from financing activities Teresa’s will report on the third quarter pro forma statement of cash flows.
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