Prepare a cash budget by month and in total for the third

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Reference no: EM13573724

Natural Care Corp., a distributor of natural cosmetics, is ready to begin its third quarter, in which peak sales occur. The company has requested a $50,000, 90-day loan from its bank to help meet cash requirements during the quarter. Because Natural Care has experienced difficulty in paying off its loans in the past, the bank's loan officer has asked the company to prepare a cash budget for the quarter. In response to this request, the following data have been assembled:

a.	On July 1, the beginning of the third quarter, the company will have a cash balance of $28,000.

b.	Actual sales for the last two months and budgeted sales for the third quarter follow (all sales are on account):


May (actual)	$	270,000
June (actual)	$	230,000
July (budgeted)	$	280,000
August (budgeted)	$	330,000
September (budgeted)	$	320,000

Past experience shows that 25% of a month's sales are collected in the month of sale, 70% in the month following sale, and 2% in the second month following sale. The remainder is uncollectible.

c.	Budgeted merchandise purchases and budgeted expenses for the third quarter are given below:

	July		August		September
Merchandise purchases	$	168,000	$	165,000	$	192,000
Salaries and wages	$	46,000	$	46,000	$	25,000
Advertising	$	56,000	$	66,000	$	67,000
Rent payments	$	23,000	$	23,000	$	23,000
Depreciation	$	33,000	$	33,000	$	33,000

	Merchandise purchases are paid in full during the month following purchase. Accounts payable for merchandise purchases on June 30, which will be paid during July, total $138,000.
d.	Equipment costing $15,000 will be purchased for cash during July.
e.	In preparing the cash budget, assume that the $50,000 loan will be made in July and repaid in September. Interest on the loan will total $1,600.

Required:
1.	Prepare a schedule of expected cash collections for July, August, and September and for the quarter in total. (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Omit the "$" sign in your response.)

Schedule of Expected Cash Collections
	July	August	September	Quarter
From accounts receivable:
May sales	$	$	$	$
June sales
From budgeted sales:
July sales
August sales
September sales

Total cash collections	$	$	$	$

Prepare a cash budget, by month and in total, for the third quarter. (Input all amounts as positive values except cash deficiency, repayments and interest which should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Omit the "$" sign in your response.)

Natural Care Corp., Cash Budget
	July	August	September	Quarter
Cash balance, beginning	$	$	$	$
Add receipts: Collections from customers

Total cash available

Less disbursements:
Merchandise purchases
Salaries and wages
Advertising
Rent payments
Equipment purchases

Total disbursements

Excess (deficiency) of receipts over disbursements

Financing:
Borrowings
Repayments
Interest

Total financing

Cash balance, ending	$	$	$	$

Reference no: EM13573724

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