Cruises Inc. has budgeted sales revenues as follows: $$225.000$380,000$285,000\begin{array}{lccc} & \text { June } & \text { July } & \text { August } \\ \text { Credit sales } & \$ 135,000 & \$ 125,000 & \$ 90,000 \\\text { Cash sales } & 90,000 & 255,000 & 195,000 \\ \text { Total sales } & \$ 225.000 & \$ 380,000 & \$ 285,000 \\\end{array}$ Past experience indicates that 60% of the credit sales will be collected in the month of sale and the remaining 40% will be collected in the following month. Purchases of inventory are all on credit and 50% is paid in the month of purchase and 50% in the month following purchase. Budgeted inventory purchases are: $105,000\begin{array} { l r } \text { June } & \$ 300,000 \\\text { July } & 240,000 \\\text { August } & 105,000\end{array}$ Other cash disbursements budgeted: (a) selling and administrative expenses of $48000 each month (b) dividends of $103000 will be paid in July and (c) purchase of equipment in August for $30000 cash.
The company wishes to maintain a minimum cash balance of $50000 at the end of each month. The company borrows money from the bank at 6% interest if necessary to maintain the minimum cash balance. Borrowed money is repaid in months when there is an excess cash balance. The beginning cash balance on July 1 was $50000. Assume that borrowed money in this case is for one month.
Instructions
Prepare a cash budget for the months of July and August. Prepare separate schedules for expected collections from customers and expected payments for purchases of inventory.

Question

Cruises Inc. has budgeted sales revenues as follows:

$225.000$380,000$285,000\begin{array}{lccc} & \text { June } & \text { July } & \text { August } \\ \text { Credit sales } & \$ 135,000 & \$ 125,000 & \$ 90,000 \\\text { Cash sales } & 90,000 & 255,000 & 195,000 \\ \text { Total sales } & \$ 225.000 & \$ 380,000 & \$ 285,000 \\\end{array}

Past experience indicates that 60% of the credit sales will be collected in the month of sale and the remaining 40% will be collected in the following month. Purchases of inventory are all on credit and 50% is paid in the month of purchase and 50% in the month following purchase. Budgeted inventory purchases are:

105,000\begin{array} { l r } \text { June } & \$ 300,000 \\\text { July } & 240,000 \\\text { August } & 105,000\end{array}

Other cash disbursements budgeted: (a) selling and administrative expenses of $48000 each month (b) dividends of $103000 will be paid in July and (c) purchase of equipment in August for $30000 cash.
The company wishes to maintain a minimum cash balance of $50000 at the end of each month. The company borrows money from the bank at 6% interest if necessary to maintain the minimum cash balance. Borrowed money is repaid in months when there is an excess cash balance. The beginning cash balance on July 1 was $50000. Assume that borrowed money in this case is for one month.
Instructions
Prepare a cash budget for the months of July and August. Prepare separate schedules for expected collections from customers and expected payments for purchases of inventory.

Mohammad Mahdi Maleki · Accepted Answer

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