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Prepare and Calculate a cash budget

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What will be the cash budget for this company: The company predicts that 5% of its credit sales will never be collected, 35% of its sales will be collected in the month of the sale, and the remaining 60% will be collected in the following month. Credit purchases will be paid in the month following the purchase. In March 2003, credit sales were $315,000.

Item April May June
Credit Sales $380,000 $340,000 $420,000
Credit Purchses $160,000 $190,000 $150,000
Cash disbursements
Wages, taxes, expenses $79,000 $75,000 $86,000
Interest $8,000 $8,000 $8,000
Equipment purchases $50,000 $70,000 $175,000

Item April May June
Beginning cash balance April =$230,000 May ? June ?
Cash disbursements April = $160,000

Ending Cash Balance April? May? June?

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Solution Summary

Given the data, the solution constructs a format of a cash budget and provides an answer complete with explanations and calculations.

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The basic elements of cash flows are as follows:
a. Starting Cash. This is the starting balance - what is on hand at the beginning of each month
b. Cash In. This is all cash received, including sales, paid receivables, interest or cash from sales of stock or assets
c. Cash Out. Includes cash put out for all fixed and variable expenses
d. Ending Cash. This is the ending balance.

The basic formula is to add starting cash to cash in for total cash then subtract cash out. An example is listed in ...

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