Using this data, along with your answer to part (1) above, prepare a cash budget in good form for… 1 answer below »

The Fraley Company, a merchandising firm, has planned the following sales for the next four months:

 

March

April

May

June

Total budgeted sales

$50,000

$70,000

$90,000

$60,000

Sales are made 40% for cash and 60% on account. From experience, the company has learned that a month’s sales on account are collected according to the following pattern:

Month of sale

70%

First month following month of sale

20%

Second month following month of sale

8%

Uncollectible

2%

The company requires a minimum cash balance of $4,000 to start a month.

Required:

a. Compute the budgeted cash receipts for June.

b. Assume the following budgeted data for June:

Purchases

$52,000

Selling and administrative expenses

$10,000

Depreciation

$8,000

Equipment purchases

$15,000

Cash balance, beginning of June

$6,000

Using this data, along with your answer to part (1) above, prepare a cash budget in good form for June. Clearly show any borrowing needed during the month. The company can borrow in any dollar amount, but will not pay any interest until the following month.