Eddie's Bar and Restaurant Supplies expects its revenues and expenses for the first 5 months of the year to be:
- Sales Expenses
- January $24,000 $18,000
- February 20,000 21,300
- March 35,000 19,100
- April 22,000 22,400
- May 28,000 14,700
80% of the firm's sales are on credit. Past experience shows that 40% of accounts receivable are collected in the month after sale, and the remainder is collected in the second month after sale. 100% of Expenses are paid in the month after it occurs.
Eddie's had a cash balance of $2,000 on March 1, which is also its minimum required cash balance. There is an outstanding loan of $6,000 that was taken out on January 1st and paid when cash is available.
a. Prepare a schedule of cash receipts for Jan, Feb, March, April, and May.
b. Prepare a cash budget for Jan, Feb, March, April, and May, each month ending with the ending cash balances.