Problem: Cash Budget
In the fourth quarter of 2017, Eurofit Cycling, a bike shop, had the following net income:
|
Sales
|
$550,000
|
|
Less cost of sales
|
250,000
|
|
Gross margin
|
300,000
|
|
Selling and administrative
|
70,000
|
|
Income before taxes
|
230,000
|
|
Income taxes
|
80,500
|
|
Net income
|
$ 149,500
|
Purchases in the fourth quarter amounted to $195,000. Estimated data for Eurofit Cycling for 2018 are as follows:
|
Quarter 1
|
Quarter 2
|
Quarter 3
|
Quarter 4
|
|
Sales
|
$400,000
|
$475,000
|
$550,000
|
$600,000
|
|
Cost of Sales
|
170,000
|
185,000
|
220,000
|
230,000
|
|
Purchases
|
160,000
|
200,000
|
225,000
|
267,000
|
|
Selling and Administration
|
67,000
|
69,000
|
71,000
|
73,000
|
Taxes are 35 percent of pretax income and are paid in the quarter incurred. Fifty percent of sales are collected in the quarter of sale and 50 percent are collected in the next quarter. Seventy percent of purchases are paid in the quarter of purchase and 30 percent are paid in the next quarter. Selling and administrative expenses are paid in the quarter incurred except for $7,000 of depreciation included in selling and administrative expense. A capital expenditure for $20,000 is planned for the fourth quarter of 2018.
Prepare a cash budget for each quarter of 2018.