The controller of Optimum wishes to improve the company’s control system by preparing a monthly cash budget. The following information relates to the month ending July 31, 2021: June 30, 2021, cash balance $ 130,000 Dividends were declared on June 15* 44,000 Cash expenditures to be paid in July for operating expenses 83,600 Depreciation expense 13,000 Cash collections to be received 198,000 Merchandise purchases to be paid in cash 122,400 Equipment to be purchased for cash 47,000 Optimum wishes to maintain a minimum cash balance of 70,000 *Dividends are payable to shareholders of record on declaration date, 30 days after declaration. Required: 1. Prepare a cash budget for the month ending July 31, 2021, indicating how much, if anything, Optimum will need to borrow to meet its minimum cash requirement. (Leave no cells blank - enter "0" wherever required). 2. Which of the following statement is true? a) The income statement allows cash shortfalls and cash surpluses to be predicted. b) Cash budgeting is not required for not-for-profit sectors c) Accuracy is required when preparing budgets d) Cah busgets are not part of financial budgets e) The balance sheet budget is prepared after the preperation of the cash budget
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.
The controller of Optimum wishes to improve the company’s
| June 30, 2021, cash balance | $ | 130,000 | |
| Dividends were declared on June 15* | 44,000 | ||
| Cash expenditures to be paid in July for operating expenses | 83,600 | ||
| Depreciation expense | 13,000 | ||
| Cash collections to be received | 198,000 | ||
| Merchandise purchases to be paid in cash | 122,400 | ||
| Equipment to be purchased for cash | 47,000 | ||
| Optimum wishes to maintain a minimum cash balance of | 70,000 | ||
*Dividends are payable to shareholders of record on declaration date, 30 days after declaration.
Required:
1. Prepare a cash budget for the month ending July 31, 2021, indicating how much, if anything, Optimum will need to borrow to meet its minimum cash requirement. (Leave no cells blank - enter "0" wherever required).
2. Which of the following statement is true?
a) The income statement allows cash shortfalls and cash surpluses to be predicted.
b) Cash budgeting is not required for not-for-profit sectors
c) Accuracy is required when preparing budgets
d) Cah busgets are not part of financial budgets
e) The
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