I. The city of Charleston had the following sales of water for the selected mont

Question

I. The city of Charleston had the following sales of water for the selected months of 2016 February March Apri May June July Sales $50,000 45,000 60,000 42500 70,000 120,000 All sales are on credit. Historically, 50 percent is collected in the month of sale, 35 percent da the first month following the sale, and 15 percent in the second month following the sale. Water purchases by month are as follows: Month February March April May June July Sales $37.500 33,750 45,000 31,875 52,500 Water is purchased in the month of sale. All purchases are paid during the month following Operating costs are $18,000 and everything is paid in cash except for depreciation, which totals $8,000 a month. The city plans on purchasing some new equipment in May for $25,000 in exchange for a note payable. Money can be borrowed from a local bank in increments of $1,000. (Do sot incliade intere charges in your budget.) The April 1 cash balance is expected to be the minimum balance of $5,00o Prepare a cash budget for April, May, and June. (Check figures: ending cash balance for May and June are $14,500, $8,500 and $22.500 respectively )

Explanation / Answer

PREPARE CASH BUDGET :

Cash payments :

April May June Beginning cash balance 5000 14500 8500 Cash collection from customer 53250 49000 58875 Total cash available 58250 63500 67375

Cash payments :

Purchase (33750) (45000) (31875) Operating cost (10000) (10000) (10000) Total cash payment (43750) (55000) (41875) Excess (deficiency) over disbursement 14500 8500 25500 Borrowing (Repayment) Ending cash balance 14500 8500 25500

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