The manager of Café Leblanc is preparing their budget for the upcoming fiscal quarter, commencing 1 April. The following information is available: The following balances are expected for the end of this fiscal quarter (31 March): cash $52,000; accounts receivable $44,000, accounts payable $28,000 and unpaid expenses $1,100. The manager expects 90% of the amount outstanding from customers at the end of this fiscal quarter to be collected in April and the remainder uncollectable. Café Leblanc has placed an order of a new coffee machine that will cost $20,000. The scheduled payment date is in June. Projected balances for the next quarter are as follows: April May June Sales revenue 80,000 82,000 84,000 Purchases 43,000 44,000 44,000 Depreciation 4,000 4,000 4,000 Salaries 2,500 2,500 2,500 Other expenses 2,000 1,800 2,000 90% of monthly sales are on credit. Receipts from credit customers are normally 40% in the month of sale, 55% in the month following the sale, and the remainder is considered uncollectable. 40% of goods purchased are paid for in the month of purchase and the remaining is paid in the following month. Salaries are paid before the end of each month. 50% of other monthly expenses are paid for in the month incurred and the remainder paid in the following month. Required: Prepare the cash budget for April and May.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

The manager of Café Leblanc is preparing their budget for the upcoming fiscal quarter, commencing 1 April. The following information is available:

The following balances are expected for the end of this fiscal quarter (31 March): cash $52,000; accounts receivable $44,000, accounts payable $28,000 and unpaid expenses $1,100. The manager expects 90% of the amount outstanding from customers at the end of this fiscal quarter to be collected in April and the remainder uncollectable.
Café Leblanc has placed an order of a new coffee machine that will cost $20,000. The scheduled payment date is in June.
Projected balances for the next quarter are as follows:

	April	May	June
Sales revenue	80,000	82,000	84,000
Purchases	43,000	44,000	44,000
Depreciation	4,000	4,000	4,000
Salaries	2,500	2,500	2,500
Other expenses	2,000	1,800	2,000

90% of monthly sales are on credit. Receipts from credit customers are normally 40% in the month of sale, 55% in the month following the sale, and the remainder is considered uncollectable.
40% of goods purchased are paid for in the month of purchase and the remaining is paid in the following month.
Salaries are paid before the end of each month. 50% of other monthly expenses are paid for in the month incurred and the remainder paid in the following month.

Required:

Prepare the cash budget for April and May.

Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.

Expert Solution

Step 1

Cash budget is very important budget that is prepared in business, which shows all estimated cash receipts as well as expected cash payments in order to derive ending balance of cash left in the organisation.