The Fraley Company, a merchandising firm, has planned the following sales for the next four months:
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March
|
April
|
May
|
June
|
|
Total budgeted sales
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$50,000
|
$70,000
|
$90,000
|
$60,000
|
Sales are made 40% for cash and 60% on account. From experience, the company has learned that a month's sales on account are collected according to the following pattern:
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Month of sale
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70%
|
|
First month following month of sale
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20%
|
|
Second month following month of sale
|
8%
|
|
Uncollectible
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2%
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The company requires a minimum cash balance of $4,000 to start a month.
Required:
a. Compute the budgeted cash receipts for June.
b. Assume the following budgeted data for June:
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Purchases
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$52,000
|
|
Selling and administrative expenses
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$10,000
|
|
Depreciation
|
$8,000
|
|
Equipment purchases
|
$15,000
|
|
Cash balance, beginning of June
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$6,000
|
Using this data, along with your answer to part (1) above, prepare a cash budget in good form for June. Clearly show any borrowing needed during the month. The company can borrow in any dollar amount, but will not pay any interest until the following month.