Reference no: EM132692018
The balance sheet of Hughes Inc., a hockey supplies distributor, as of May 31 is given below:Hughes INC.
Balance Sheet
May 31, 2XXX
ASSETS
Cash $18,000
Accounts receivable 85,000
Inventory 30,000
Buildings and equipment, net of depreciation 483,000
Total assets $616,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable, Suppliers $90,000
Note payable 22,000
Common shares 419,000
Retained earnings 85,000
Total liabilities and shareholders' equity $616,000
Hughes Inc. has not budgeted previously, so it is limiting its master budget planning horizon to just one month ahead - namely, June. The company has assembled the following budget data relating to June:
- Sales are forecast to be $300,000; $50,000 will be received in cash; the balance will be credit sales. One-half of the credit sales for a month are collect in the month of sale, and the balance is collected the next month. The entire May 31 accounts receivable balance will be collected in June.
- Inventory purchases are expected to total $180,000 during the month of June. All of these purchases will be on account. Sixty percent of all inventory purchases is paid for in the month of purchase with the other 40% paid the next month. The entire balance of the May 31 accounts payable to suppliers will be paid during June.
- The selling and administrative expenses budget for June is $39,000, excluding depreciation. All of these expenses were paid in cash.
- The May 31 note payable that appears on the balance sheet will be paid in June.
- Warehouse equipment totaling $20,000 will be acquired for cash in June.
Required:
Question 1. What is the total amount of cash to be received in June?
Question 2. What is the total amount of cash to be paid out in June?
Question 3. Given your results from the analysis above, comment on the liquidity of Hughes Inc. Specifically, do you think they'll be able to meet cash flow obligations for the month of June?