Reference no: EM132502276

The following information is available to assist in preparing a cash budget. Budgeted income statements for July through October 2017 as follows:

                                    July                     August                   September                      October

Sales                                 $22,000         $28,000             $32,000                      $40,000

cost of goods sold              (11,000)           (15,000)            (17,000)                    (21,000)

gross profit                           11,000                 13,000            15,000                     19,000

less other expenses

selling                                    3,300                   4,000             4,400                     5,200

administrative                             3,600                5,000                4,200                 4,600

total                                       (6,900)                (9,000)                (8,600)              (9,800)

net income                                  $4,100                  $4,000                   $6,400            $9,200

additional information:

1. other expenses which are paid monthly, include $2,000 of depreciation per month.
2. sales are 40% for cash and 60% on credit
3. credit sales are collected 25% in the month of the sale, 65% one month after sale, and 10% two months after sale. May sales were $16,000 and June sales were $17,000.
4. merchandise is paid for 50% in the month of purchase, the remaining 50% is paid in the following month. Accounts payable for merchandise at June 30 is $7,000.
5. the company maintains its ending inventory levels at 20% of the cost of goods to be sold in the following month. The inventory at June 30 is $2,200
6. an equipment note of $6,000 per month is being paid through August
7. the company must maintain a cash balance of at least $6,000 at the end of each month. The cash balance on June 30 is $6,100.
8. the company can borrow from its bank as needed. Borrowing and repayments must be in multiples of $100. All borrowings take place at the beginning of a month, and all repayments are made at the end of a month. When the principal is repaid, interest on the repayment is also paid. The interest rate is 12 % per year.

Required:

Question a. Show a monthly schedule of budgeted operating cash receipts for July, August and September.

Question b. Show a monthly purchases budget and a schedule of budgeted cash payments for purchases for July, August and September.

Question c. Show a monthly cash budget for July, August and September. Show borrowings from the company's bank and repayments to the bank as needed to maintain the minimum cash balance.