EBK CORPORATE FINANCE
11th Edition
ISBN: 8220102798878
Author: Ross
Publisher: YUZU
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Chapter 26, Problem 10QP
Summary Introduction
To prepare: Cash budget of C Incorporation.
Cash Budget:
Cash budget is prepared to ascertain the amount of cash for a given period. Cash budget is a statement that contains the information of cash receipts and cash payments. Closing balance of cash is calculated with the help of cash budget.
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Here are some important figures from the budget of Nashville Nougats, Incorporated, for
the second quarter of 2021:
Credit sales
Credit purchases
Cash disbursements
Wages, taxes, and
expenses
Interest
Equipment purchases
Beginning cash balance
Cash receipts
Cash collections from credit sales
Total cash available
Cash disbursements
Purchases
Wages, taxes, and expenses
Interest
The company predicts that 5 percent of its credit sales will never be collected, 40
percent of its sales will be collected in the month of the sale, and the remaining 55
percent will be collected in the following month. Credit purchases will be paid in the
month following the purchase.
Equipment purchases
April
May
June
$312,000 $292,000 $352,000
120,000 143,000 168,000
In March 2021, credit sales were $182,000 and credit purchases were $122,000. Using
this information, complete the following cash budget: (Do not round intermediate
calculations. Leave no cells blank - be certain to enter "0" wherever required.)…
Q8) Prepare a cash budget for the first quarter for Shamz Logistics Inc., given the following data. Management has projected total and credit sales for the first three months of 2016 in the given table. Based on historical data, 40% of credit sales are collected in the month the sales were made, and 60% are collected the next month. Purchases are estimated to be 50% of the next month’s total sales, but are paid for in the month following the order. (Expenditure for inventory in each month is 50% of that month’s sales.) The beginning and target cash balance is $250,000.
Month
Year
Credit sales
December
2015
170,000
January
2016
160,000
February
2016
178,000
march
2016
185,000
Item
January
February
March
Wages
25,000
29,000
29,000
Rent
2,700
2,700
2,700
Other
1,000
1,200
1,400
Taxes
15,000
--
--
Dividend
--
--
4,000
Cap. Ex.
--
5,000
--
Use the information below to answer question 1 to 22.
The financial controller of BOE Ltd. is gathering data to prepare a cash budget for the second
quarter of 2018. The following information is available.
a) Sales for the first six months of the year are as follows:
January
February
March
23,000
30,000
50,000
57,000
60,000
56,000
April
Мay
June
a) 40% of all sales are cash sales.
b) Of credit sales, 50% are collected in the month of sales and the remaining 50% collected
the following month.
c) The cost of raw materials equals 35% of each month's sales. 50% of raw materials are paid
for in the month of purchase. The remaining 50% are paid in the following month.
d) Wages total ¢5,500 per month and are paid for in the month incurred.
e) Operating expenses per month totalled ¢16,800 of which ¢2,500 is depreciation and ¢300
is expiration of prepaid insurance premium (the annual premium of ¢3,600 paid in Jan 1).
f) Dividend of ¢7,000 declared in March 31 will be paid on April 20.
g) Old…
Chapter 26 Solutions
EBK CORPORATE FINANCE
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- A companys sales for the coming months are as follows: About 20 percent of sales are cash sales, and the remainder are credit sales. The company finds that typically 10 percent of a months credit sales are paid in the month of sale, 70 percent are paid the next month, and 15 percent are paid in the second month after sale. Expected cash receipts in July are budgeted at what amount? a. 114,520 b. 143,150 c. 145,720 d. 156,000arrow_forwardCASH BUDGETING Helen Bowers, owner of Helens Fashion Designs, is planning to request a line of credit from her bank. She has estimated the following sales forecasts for the firm for parts of 2019 and 2020: Estimates regarding payments obtained from the credit department are as follows: collected within the month of sale, 10%; collected the month following the sale, 75%; collected the second month following the sale, 15%. Payments for labor and raw materials are made the month after these services were provided. Here are the estimated costs of labor plus raw materials: General and administrative salaries are approximately 27,000 a month. Lease payments under long-term leases are 9,000 a month. Depreciation charges are 36,000 a month. Miscellaneous expenses are 2,700 a month. Income tax payments of 63,000 are due in September and December. A progress payment of 180,000 on a new design studio must be paid in October. Cash on hand on July 1 will be 132,000, and a minimum cash balance of 90,000 should be maintained throughout the cash budget period. a. Prepare a monthly cash budget for the last 6 months of 2019. b. Prepare monthly estimates of the required financing or excess fundsthat is, the amount of money Bowers will need to borrow or will have available to invest. c. Now suppose receipts from sales come in uniformly during the month (that is, cash receipts come in at the rate of 1/30 each day), but all outflows must be paid on the 5th. Will this affect the cash budget? That is, will the cash budget you prepared be valid under these assumptions? If not, what could be done to make a valid estimate of the peak financing requirements? No calculations are required, although if you prefer, you can use calculations to illustrate the effects. d. Bowers sales are seasonal, and her company produces on a seasonal basis, just ahead of sales. Without making any calculations, discuss how the companys current and debt ratios would vary during the year if all financial requirements were met with short-term bank loans. Could changes in these ratios affect the firms ability to obtain bank credit? Explain.arrow_forwardCarmichael Corporation is in the process of preparing next years budget. The pro forma income statement for the current year is as follows: Required: 1. What is the break-even sales revenue (rounded to the nearest dollar) for Carmichael Corporation for the current year? 2. For the coming year, the management of Carmichael Corporation anticipates an 8 percent increase in variable costs and a 60,000 increase in fixed expenses. What is the break-even point in dollars for next year? (CMA adapted)arrow_forward
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