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Cash Budgeting for Binghamton Film Corporation

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The following information is from Binghamton Film Corporation's financial records.

Month Sales Purchases
April $72,000 $42,000
May 66,000 48,000
June 60,000 36,000
July 78,000 54,000

Collections from customers are normally 70 percent in the month of the sale, 20 percent in the month following the sale, and 9 percent in the second month following sale. The balance is expected to be uncollectable. All purchases are on account. Management takes full advantage of the 2% discount allowed on purchases paid for by the tenth of the following month. Purchases for August are budgeted at $60,000, and sales for August are forecasted at $66,000. Cash disbursements for expenses are expected to be $14,000 for the month of August. The company's cash balance on August 1 was $22,000.

1. Figure the schedule for expected cash collections during August.

2. Figure the schedule for expected cash disbursements during August.

3. Figure the schedule for expected cash balance on August 31.

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Solution Summary

The solution explains how to prepare a schedule for expected cash collections and a schedule for expected cash disbursements and determine the ending cash balance.

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Binghamton Film Corporation: Expected Cash Collections

The following information is from Binghamton Film Corporation's financial records.

Month Sales Purchases
April $ 72,000 $ 42,000
May 66,000 48,000
June 60,000 36,000
July 78,000 54,000

Collections from customers are normally 70 percent in the month of sale, 20 percent in the month following the sale, and 9 percent in the second month following the sale. The balance is expected to be uncollectible. All purchases are on account. Management takes full advantage of the 2 percent discount allowed on purchases paid for by the tenth of the following month. Purchases for August are budgeted at $60,000, and sales for August are forecasted at $66,000. Cash disbursements for expenses are expected to be $14,400 for the month of August. The company's cash balance on August 1 was $22,000.

Required:
1. Prepare the expected cash collections schedule during August.

BINGHAMTON FILM CORPORATION
EXPECTED CASH COLLECTIONS
AUGUST

Month Sales Percent Expected collections
June $ ? ? % $ ?
July ? ? % ?
August ? ? % ?

___________

Total $ $ ????

2. Prepare the expected cash disbursements schedule during August.

BINGHAMTON FILM CORPORATION
EXPECTED CASH COLLECTIONS
AUGUST

July purchases to be paid in August $ ------------------------------------- ??

(Click to select)Add : 2% cash discountLess : 2% cash discount

Net $ ----------------------------------------------------------------------- ???

Cash disbursements for expenses ------------------------------------ ???

________
Total $ -------------------------------------------------------------------- $ ???

3. Calculate the expected cash balance on August 31.

Expected cash balance $ ???

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