13 Aug ACDC Pty Ltd – Cash Budget
- The cash balance on September 1 is $7,500
- Actual sales for July and August, and expected sales for September are:
July August September
Cash sales $5,000 $5,250 $6,500
Credit sales 25,000 30,000 35,000
Total sales 30,000 35,250 41,500
Credit sales are collected over a three-month period in the ratio of 60 percent, 30 percent, 9 percent, with 1 percent uncollectible.
- Purchases of inventory will total $18,000 for September. Seventy percent of a month’s purchases are paid during the month of purchase. Accounts payable for August purchases total $6,150, which will be paid in September.
- Selling and administration expenses are budgeted at $14,000 for September. Of this $5,000 is for depreciation.
- Dividends of $5,000 will be paid during September, and equipment costing $12,000 will be purchased.
- The company must maintain a minimum of cash balance of $5,000. An overdraft facility is available from the company’s bank to bolster the cash position as needed.
Required:
Prepare a cash budget for the month of September showing your supporting calculations and heading. Indicate in the financing section any borrowing that will be necessary during the month.
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