Reference no: EM132519713

Cash Budget for the Months of May, June and July based on the information shown below.

Question 1. Determine the Monthly Net Cash Flow.

Question 2. Determine if the firm would have a required financing (deficit) or excess cash balance (surplus) for each period

Month                       Sales                  Purchases

March                     $50,000                $50,000

April                         $60,000              $70,000

May                         $70,000                   $ 50,000

June                      $80,000                        $ 70,000

July                         $100,000                      $ 80,000

Additional Data

1. The firm collects 20% of sales for cash; and 60% one month later and the rest two months later following the sale (based on past history).

2. The firm will sell a machinery for cash in July for $5,000.

3. Other income will be received for cash is month for $2,000

4. The firm pays for cash for 30% of its purchases (same month) and the rest 70% of its purchases the following month.

5. Rent will be paid each month for $3.000

6. Salaries and Wages amount to 10% of the preceding months sales

7. A principal and interest payment on an Outstanding loan is due in June of $4,000

8. The firm will pay cash dividends of $3,000 at the end of June.

9. The firm will pay stock dividends in May at $5,000

10. New equipment costing $6,000 will be purchased in July.

11. Taxes due on June will be $6,000

12. The firm has a beginning cash balance in May of $5,000.

13. The firm maintains a minimum cash balance of $ $5,000 each month.

Question 3: Prepare the Cash Budget for the months of May, June and July

Question 4: Analyze the results obtained in the Cash Budget in a minimum of two sentences.