Question

Built-Tight is preparing its master budget for the quarter ended September 30. Budgeted sales and cash payments for product costs for the quarter follow. July August September Budgeted sales $ 60,000 $ 76,000 $ 52,000 Budgeted cash payments for Direct materials 16,960 14,240 14,560 Direct labor 4,840 4,160 4,240 Factory overhead 21,000 17,600 18,000 Sales are 30% cash and 70% on credit. All credit sales are collected in the month following the sale. The June 30 balance sheet includes balances of $15,000 in cash; $45,800 in accounts receivable; and a $5,800 balance in loans payable. A minimum cash balance of $15,000 is required. Loans are obtained at the end of any month when a cash shortage occurs. Interest is 1% per month based on the beginning-of-the-month loan balance and is paid at each month-end. If an excess balance of cash exists, loans are repaid at the end of the month. Operating expenses are paid in the month incurred and consist of sales commissions (10% of sales), office salaries ($4,800 per month), and rent ($7,300 per month).
Part 1 (1) Prepare a cash receipts budget for July, August, and September.
Part 2 (2) Prepare a cash budget for each of the months of July, August, and September. (Negative balances and Loan repayment amounts (if any) should be indicated with minus sign. Enter your final answers in whole dollars.)

Answer 1

Answer:

(1) Total cash receipts:

July = $63,800      

August = $64,800

September = $68,800

2-a. Ending Cash Balance:

July = $15,00

August = $21,173

September = $35,873

2-b. Loan Balance End of Month:

July = $2,898

August = $0

September = $0

Explanation:

(1) Prepare a cash receipts budget for July, August, and September.

Note: See part (1) of the attached excel file for the cash receipts budget for July, August, and September.

From the attached excel file, we have:

Total cash receipts:

July = $63,800      

August = $64,800

September = $68,800

(2) Prepare a cash budget for each of the months of July, August, and September.

Note: See part (2) of the attached excel file for the cash budget for July, August, and September.

In the attached excel file, the following calculation is made:

July loan repayment = July preliminary cash balance - Minimum cash balance required = $17,902 - $15,000 = $2,902

From the attached excel file, we have:

2-a. Ending Cash Balance:

July = $15,00

August = $21,173

September = $35,873

2-b. Loan Balance End of Month:

July = $2,898

August = $0

September = $0

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