Reference no: EM132769407

Question - Cash budget-Basic - Grenoble Enterprises had sales of $50,000 in March and $59,600 in April. Forecast sales for May, June, and July are $69,900, $79,500, and $99,900, respectively. The firm has a cash balance of $5,200 on May 1 and wishes to maintain a minimum cash balance of $5,200. Given the following data, prepare and interpret a cash budget for the months of May, June, and July.

(1) The firm makes 18% of sales for cash, 63% are collected in the next month, and the remaining 19% are collected in the second month following sale.

(2) The firm receives other income of $1,700 per month.

(3) The firm's actual or expected purchases, all made for cash, are $49,700, $70,200, and $79,900 for the months of May through July, respectively.

(4) Rent is $2,800 per month.

(5) Wages and salaries are 11% of the previous month's sales.

(6) Cash dividends of $3,500 will be paid in June.

(7) Payment of principal and interest of $3,900 is due in June.

(8) A cash purchase of equipment costing $5,800 is scheduled in July.

(9) Taxes of $5,700 are due in June.