In preparation for the quarterly cash budget, the following revenue and cost information have been compiled. Prepare and evaluate a cash budget for the months of October, November, and December based on the information shown below.       ∙     The firm collects 60 percent of sales for cash and 40 percent of its sales one month later. ∙     Interest income of $50,000 on marketable securities will be received in December. ∙     The firm pays cash for 40 percent of its purchases. ∙     The firm pays for 60 percent of its purchases the following month. ∙     Salaries and wages amount to 15 percent of the preceding month's sales. ∙     Sales commissions amount to 2 percent of the preceding month's sales. ∙     Lease payments of $100,000 must be made each month. ∙     A principal and interest payment on an outstanding loan is due in December of $150,000. ∙     The firm pays dividends of $50,000 at the end of the quarter. ∙     Fixed assets costing $600,000 will be purchased in December. ∙     Depreciation expense each month of $45,000. ∙     The firm has a beginning cash balance in October of $100,000 and maintains a minimum cash balance of $200,000.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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FIN 3004 Business Finance 

           Homework

In preparation for the quarterly cash budget, the following revenue and cost information have been compiled. Prepare and evaluate a cash budget for the months of October, November, and December based on the information shown below.

 

 

 

∙     The firm collects 60 percent of sales for cash and 40 percent of its sales one month later.

∙     Interest income of $50,000 on marketable securities will be received in December.

∙     The firm pays cash for 40 percent of its purchases.

∙     The firm pays for 60 percent of its purchases the following month.

∙     Salaries and wages amount to 15 percent of the preceding month's sales.

∙     Sales commissions amount to 2 percent of the preceding month's sales.

∙     Lease payments of $100,000 must be made each month.

∙     A principal and interest payment on an outstanding loan is due in December of $150,000.

∙     The firm pays dividends of $50,000 at the end of the quarter.

∙     Fixed assets costing $600,000 will be purchased in December.

∙     Depreciation expense each month of $45,000.

∙     The firm has a beginning cash balance in October of $100,000 and maintains a minimum cash balance of $200,000.

Month
Sales
$3,000,000
Purchases
August (actual)
September (actual)
October (forecast)
November (forecast)
December (forecast)
$3,500,000
$4,500,000
$2,000,000
$1,000,000
$1,500,000
$2,000,000
$ 500,000
$ 750,000
$1,000,000
Transcribed Image Text:Month Sales $3,000,000 Purchases August (actual) September (actual) October (forecast) November (forecast) December (forecast) $3,500,000 $4,500,000 $2,000,000 $1,000,000 $1,500,000 $2,000,000 $ 500,000 $ 750,000 $1,000,000
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