The controller of Minota Company is gathering data to prepare the cash budget for July 2008. He plans to develop the budget from the following information:
a. Of all sales, 30 percent are cash sales.
b. Of credit sales, 60 percent are collected within the month of sale. Half of the credit sales collected within the month receive a 2 percent cash discount (for accounts paid within 10 days). Twenty percent of credit sales are collected in the following month; remaining credit sales are collected the month thereafter. There are virtually no bad debts.
c. Sales for the second two quarters of the year follow. (The first three months are actual sales, and the last three months are estimated sales.)
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Sales
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April
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$ 460,000
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May
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600,000
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|
June
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1,000,000
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July
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1,140,000
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August
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1,200,000
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September
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1,134,000
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d. The company sells all that it produces each month. The cost of raw materials equals 24 percent of each sales dollar. The company requires a monthly ending inventory equal to the coming month's production requirements. Of raw materi- als purchases, 50 percent are paid for in the month of purchase. The remaining 50 percent are paid for in the following month.
e. Wages total $110,000 each month and are paid in the month incurred.
f. Budgeted monthly operating expenses total $336,000, of which $50,000 is depreciation and $6,000 is expiration of prepaid insurance. (The annual pre- mium of $72,000 is paid on January 1.)
g. Dividends of $140,000, declared on June 30, will be paid on July 15.
h. Old equipment will be sold for $25,200 on July 4.
i. On July 13, new equipment will be purchased for $168,000.
j. The company maintains a minimum cash balance of $20,000.
k. The cash balance on July 1 is $27,000.
Required
Prepare a cash budget for July. Give a supporting schedule that details the cash collections from sales.