Financial and Managerial Accounting (Looseleaf) (Custom Package)
Financial and Managerial Accounting (Looseleaf) (Custom Package)
6th Edition
ISBN: 9781259754883
Author: Wild
Publisher: MCG
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Chapter 20, Problem 30E
To determine

Cash Budget:

It is the prediction of cash inflows and outflows for an entity over a period of time. It is helpful in assessing that the entity has enough cash to operate.

To prepare: Monthly cash budget for the month of April, May, June.

Expert Solution & Answer
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Explanation of Solution

Company C
Cash Budget
Particulars April Amount ($) May Amount ($) June Amount ($)
Beginning cash balance 12,000 12,000 12,279
Add: Cash receipts (Working Note 1) 28,000 36,000 32,000
Total cash available 40,000 48,000 44,279
Less: Cash disbursement (Working Note 2) 32,040 29,600 28,080
Interest expense (working note 3) 20 61 -
Preliminary cash balance 7,940 18,339 16,199
Less: Required ending cash balance 12,000 12,000 12,000
Surplus (4,060) 6,339 4,199
Beginning balance of loan 2,000 6,060 0
Add: Additional loan from bank 4,060 0 0
Less: Repayment of loan 0 6,060 0
Ending loan balance 6,060 0 0
Ending cash balance carried forward next month 12,000 12,279 16,199
Table (1)

Working note:

Company C
Cash Receipts
Particulars April Amount ($) May Amount ($) June Amount ($)
Sales 32,000 40,000 24,000
Cash collection:
Previous sale (50%) 12,000 16,000 20,000
Current sale (50%) 16,000 20,000 12,000
Total 28,000 36,000 32,000
Table (2)

Working note:

Company C
Cash Disbursements
Particulars April Amount ($) May Amount ($) June Amount ($)
Cash payments for merchandise 20,200 16,800 17,200
Sales commission ( sales×10% ) 3,200 4,000 2,400
Shipping ( sales×2% ) 640 800 480
Salaries 5,000 5,000 5,000
Rent 3,000 3,000 3,000
Total 32,040 29,600 28,080
Table (3)

Working note:

Formula to calculate interest expense for the month,

    Interest expense=Beginning balance of loan×1% 

For April

Given,
Beginning balance of loan is $2,000.

Substitute $2,000 for beginning balance.

    Interest expense=$2,000×1% =$20

For May,

Beginning balance of loan $6,060 (calculated).

Substitute $6,060 for beginning balance.

    Interest expense=$6,060×1% =$61

For June,

Beginning balance of loan $0 (calculated).

Substitute $0 for beginning balance.

    Interest expense=$0×1% =$0

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Chapter 20 Solutions

Financial and Managerial Accounting (Looseleaf) (Custom Package)

Ch. 20 - How does budgeting help management coordinate and...Ch. 20 - Why is the sales budget so important to the...Ch. 20 - What is the selling expense budget? What is the...Ch. 20 - Budgeting promotes good decision making by...Ch. 20 - GOOGLE Google prepares a cash budget. What is a...Ch. 20 - Prob. 11DQCh. 20 - Prob. 12DQCh. 20 - Prob. 13DQCh. 20 - Prob. 14DQCh. 20 - Prob. 1QSCh. 20 - Prob. 2QSCh. 20 - Prob. 3QSCh. 20 - Prob. 4QSCh. 20 - Prob. 5QSCh. 20 - Prob. 6QSCh. 20 - Prob. 7QSCh. 20 - Prob. 8QSCh. 20 - Prob. 9QSCh. 20 - Prob. 10QSCh. 20 - Prob. 11QSCh. 20 - Prob. 12QSCh. 20 - Prob. 13QSCh. 20 - Prob. 14QSCh. 20 - Prob. 15QSCh. 20 - Manufacturing: Production budget P1 Atlantic Surf...Ch. 20 - Prob. 17QSCh. 20 - Prob. 18QSCh. 20 - Prob. 19QSCh. 20 - Cash receipts, with uncollectible accounts P2 The...Ch. 20 - Cash receipts, with uncollectible accounts P2 Well...Ch. 20 - Prob. 22QSCh. 20 - Prob. 23QSCh. 20 - Prob. 24QSCh. 20 - Prob. 25QSCh. 20 - Prob. 26QSCh. 20 - Prob. 27QSCh. 20 - Prob. 28QSCh. 20 - Prob. 29QSCh. 20 - Prob. 30QSCh. 20 - Prob. 31QSCh. 20 - Prob. 32QSCh. 20 - Prob. 1ECh. 20 - Prob. 2ECh. 20 - Prob. 3ECh. 20 - Prob. 4ECh. 20 - Exercise 20-5 Manufacturing: Direct labor budget...Ch. 20 - Prob. 6ECh. 20 - Prob. 7ECh. 20 - Prob. 8ECh. 20 - Prob. 9ECh. 20 - Prob. 10ECh. 20 - Prob. 11ECh. 20 - Prob. 12ECh. 20 - Prob. 13ECh. 20 - Prob. 14ECh. 20 - Prob. 15ECh. 20 - Prob. 16ECh. 20 - Prob. 17ECh. 20 - Prob. 18ECh. 20 - Prob. 19ECh. 20 - Prob. 20ECh. 20 - Prob. 21ECh. 20 - Prob. 22ECh. 20 - Prob. 23ECh. 20 - Prob. 24ECh. 20 - Prob. 25ECh. 20 - Prob. 26ECh. 20 - Prob. 27ECh. 20 - Prob. 28ECh. 20 - Prob. 29ECh. 20 - Prob. 30ECh. 20 - Prob. 31ECh. 20 - Prob. 32ECh. 20 - Prob. 33ECh. 20 - Prob. 34ECh. 20 - Prob. 1PSACh. 20 - Prob. 2PSACh. 20 - Prob. 3PSACh. 20 - Prob. 4PSACh. 20 - Prob. 5PSACh. 20 - Prob. 6PSACh. 20 - Prob. 7PSACh. 20 - Prob. 8PSACh. 20 - Prob. 1PSBCh. 20 - Prob. 2PSBCh. 20 - Prob. 3PSBCh. 20 - Prob. 4PSBCh. 20 - Prob. 5PSBCh. 20 - Prob. 6PSBCh. 20 - Prob. 7PSBCh. 20 - Prob. 8PSBCh. 20 - Prob. 20SPCh. 20 - Prob. 1BTNCh. 20 - Prob. 2BTNCh. 20 - ETHICS CHALLENGE C1 BTN 20-3 Both the budget...Ch. 20 - Prob. 4BTNCh. 20 - Prob. 5BTNCh. 20 - Prob. 6BTNCh. 20 - Prob. 7BTNCh. 20 - Prob. 8BTNCh. 20 - Prob. 9BTN
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