The owner of a building supply company has requested a cash budget for June. After examining the records of the company, you find the following: A. Cash balance on June 1 is $736.
B. Actual sales for April and May are as follows:
April May
Cash sales $10,000 $18,000
Credit sales 28,900 35,000
Total sales $38,900 $53,000
C. Credit sales are collected over a three-month period: 40% in the month of sale, 30% in the second month, and 20% in the third month. The sales collected in the third month are subject to a 2% late fee, which is paid by those customers in addition to what they owe. The remaining sales are uncollectible.
D. Inventory purchases average 64% of a month's total sales. Of those purchases, 20% are paid for in the month of purchase. The remaining 80% are paid for in the following month.
E. Salaries and wages total $11,750 per month, including a $4,500 salary paid to the owner.
F. Rent is $4,100 per month.
G. Taxes to be paid in June are $6,780.
The owner also tells you that he expects cash sales of $18,600 and credit sales of $54,000 for June. No minimum cash balance is required. The owner of the company doesn't have access to short-term loans.
Prepare a cash budget for June. Include supporting schedules for cash collections and cash payments. Round calculations and final answers to the nearest dollar.

Answer and Explanation:

The Preparation of the cash budget for June is prepared below:-

                                      Cash Budget

                                For the month of June

Particulars                                                   Amount

Begining cash                                             $736

Add:

Collections:

Cash sales                                                  $18,600

Credit sales

Current month                                          $21,600   ($54,000 × 30%)

May credit                                                 $10,500    ($35,000 × 30%)

Credit sales of April                                   $5,896  (explained in note 1)

Total cash available                                   $57,332

Less: Disbursement

Purchase of inventory

Current month                                              $9,293 (explained in note 2)

($46,464 × 20%)

Prior month                                                   $27,136  (explained in note 2)

($33,920 × 80%)

Salary                                                             $11,750 (explained in note 3)

Rent                                                                $4,100

Taxes                                                              $6,780

Need's total                                                    -$1,727

Excess for cash available

over needs

Note:-

1. Amount which is received in June is

= $28,900 × 20%

= $5,780

Late fees = $5,780 × 2%

= $116

June receipts is

= $5,780 + $116

= $5,896

2. Purchase of inventory is

= $53,000 × 64%

= $33,920

Total sales = Cash + Credit sales

= $72,600

Puchase of inventory = $72,600 × 64%

= $46,464

3. Entirely amount is taken of salaries and wages if it paid or not.