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Cornell Inc. Case Study: Calculating Cash Budget

Calculating the Cash Budget Here are some important figures from the budget of Cornell, Inc., for the second quarter of 2007:

April May June
Credit sales $380,000 $396,000 $438,000
Credit purchases 147,000 175,500 200,500
Cash disbursements
Wages, taxes, and expenses 39,750 48,210 50,300
Interest 11,400 11,400 11,400
Equipment purchases 83,000 91,000 0

The company predicts that 5 percent of its credit sales will never be collected, 35 percent of its sales will be collected in the month of the sale, and the remaining 60 percent will be collected in the following month. Credit purchases will be paid in the month following the purchase. In March 2007, credit sales were $210,000, and credit purchases were $156,000. Using this
information, complete the following cash budget:

April May June
Beginning cash balance $280,000
Cash receipts
Cash collections from credit sales
Total cash available
Cash disbursements
Wages, taxes, and expenses
Equipment purchases
Total cash disbursements
Ending cash balance

Solution Summary

The solution calculates the cash budgets for Cornell, Inc. The credit sales and credit purchases are determined.