P3. Cash budget _Grenoble Enterprises

P3.   Cash budget – Basic

Grenoble Enterprises had sales of $50,000 in March and $60,000 in April. Forecast sales for May, June, and July are $70,000, $80,000, and $100,000, respectively. The firm has a cash balance of $5,000 on May 1 and wishes to maintain a minimum cash balance of $5,000. Given the following data, prepare and interpret a cash budget for the months of May, June, and July.

1)     
The firm makes 20% of sales for cash, 60% are collected in the next month, and the remaining 20% are collected in the second month following sale.

2)     
The firm receives other income of $2,000 per month.

3)     
The firm’s actual or expected purchases, all made for cash, are $50,000, $70,000, and $80,000 for the months of May through July, respectively.

4)     
Rent is $3,000 per month.

5)     
Wages and salaries are 10% of the previous month’s sales.

6)     
Cash dividends of $3,000 will be paid in June.

7)     
Payment of principal and interest of $4,000 is due in June.

8)     
A cash purchase of equipment costing $6,000 is scheduled in July.

 

9)     
Taxes of $6,000 are due in June.