Preparation, evaluation and use of cash budget Description: Grenoble Enterprises had sales of $50,000 in March and $60,000 in April. Forecasted sales in May, June, and July are $70,000, $80,000, and $100,000, respectively. On May 1, the company has a cash balance of $5,000 and wants to maintain a minimum cash balance of $5,000. Using the following data, prepare and interpret, in an organized and detailed table, a cash budget for the months of May, June, and July. The company makes 20% of its sales in cash, collects 60% the following month and collects the remaining 20% in the second month after the sale. The company receives another income of $2,000 per month. The amounts of the company's actual or expected purchases, all in cash, are $50,000, $70,000, and $80,000 in the months of May through July, respectively. The rent is $3,000 per month. Salaries and salaries correspond to 10% of sales from the previous month. Cash dividends of $3,000 will be paid in June. A principal and interest payment of $4,000 will be made in June. A cash purchase of equipment costing $6,000 is scheduled in July. Taxes of $6,000 will be paid in June
Preparation, evaluation and use of cash budget Description: Grenoble Enterprises had sales of $50,000 in March and $60,000 in April. Forecasted sales in May, June, and July are $70,000, $80,000, and $100,000, respectively. On May 1, the company has a cash balance of $5,000 and wants to maintain a minimum cash balance of $5,000. Using the following data, prepare and interpret, in an organized and detailed table, a cash budget for the months of May, June, and July. The company makes 20% of its sales in cash, collects 60% the following month and collects the remaining 20% in the second month after the sale. The company receives another income of $2,000 per month. The amounts of the company's actual or expected purchases, all in cash, are $50,000, $70,000, and $80,000 in the months of May through July, respectively. The rent is $3,000 per month. Salaries and salaries correspond to 10% of sales from the previous month. Cash dividends of $3,000 will be paid in June. A principal and interest payment of $4,000 will be made in June. A cash purchase of equipment costing $6,000 is scheduled in July. Taxes of $6,000 will be paid in June
Chapter4: Financial Planning And Forecasting
Section: Chapter Questions
Problem 4P
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Concept explainers
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Question
Preparation, evaluation and use of cash budget Description: Grenoble Enterprises had sales of $50,000 in March and $60,000 in April. Forecasted sales in May, June, and July are $70,000, $80,000, and $100,000, respectively. On May 1, the company has a cash balance of $5,000 and wants to maintain a minimum cash balance of $5,000. Using the following data, prepare and interpret, in an organized and detailed table, a cash budget for the months of May, June, and July. The company makes 20% of its sales in cash, collects 60% the following month and collects the remaining 20% in the second month after the sale. The company receives another income of $2,000 per month. The amounts of the company's actual or expected purchases, all in cash, are $50,000, $70,000, and $80,000 in the months of May through July, respectively. The rent is $3,000 per month. Salaries and salaries correspond to 10% of sales from the previous month. Cash dividends of $3,000 will be paid in June. A principal and interest payment of $4,000 will be made in June. A cash purchase of equipment costing $6,000 is scheduled in July. Taxes of $6,000 will be paid in June
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