ACCT504 Case Study 3 on Cash Budgeting The cash budget was


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ACCT504 Case Study 3 on Cash Budgeting The cash budget was covered during Week 4 when we covered TCO D and you read Chapter 7. There is also a practice case study to work on. Your Professor will provide the solution to the practice case study at the end of Week 5. This case study should be uploaded by 11:59PM Mountain time of the Sunday ending Week 6 to the Week 6 Assignment Dropbox. You are encouraged to use the Excel template file provided in Doc Sharing. The LBJ Company has budgeted sales revenues as follows: April May June Credit sales $94,000 $89,500 $75,000 Cash sales 48,000 75,000 57,000 Total sales $142,000 $164,500 $132,000 Past experience indicates that 30% of the credit sales will be collected in the month of sale and the remaining 70% will be collected in the following month. Purchases of inventory are all on credit and 40% is paid in the month of purchase and 60% in the month following purchase. Budgeted inventory purchases are $195,000 in April, $135,000 in May, and $63,000 in June. Other budgeted cash receipts: (a) sale of plant assets for $33,000 in May, and (b) sale of new common stock for $50,000 in June. Other budgeted cash disbursements: (a) operating expenses of $15,000 each month, (b) selling and administrative expenses of $10,150 each month, (c) purchase of equipment for $19,000 cash in June, and (d) dividends of $20,000 will be paid in June. The company has a cash balance of $20,000 at the beginning of May and wishes to maintain a minimum cash balance of $20,000 at the end of each month. An open line of credit is available at the bank and carries an annual interest rate of 10%. Assume that all borrowing is done on the first day of the month in which financing is needed and that all repayments are made on the last day of the month in which excess cash is available. Also assume that there is no outstanding financing as of May 1. Requirements: 1. Use this information to prepare a Cash Budget for the months of May and June, using the template provided in Doc Sharing. IS MY SPREADSHEET RIGHT? ATTACHMENT PREVIEW Download attachment ACCT504 Case Study 3.xlsx CASE STUDY 3 – Cash Budget Template SCHEDULE OF EXPECTED CASH COLLECTIONS FROM CUSTOMERS: Credit Sales April May June Total Cash Collections May 65,800 26,850 SCHEDULE FOR EXPECTED PAYMENTS FOR PURCHASE OF INVENTORY Inventory purchases April May June Total Payments for Inventory Purchases 92,650 May 117,000 54,000 June 62,650 22,500 85,150 June 171,000 81,000 25,200 106,200 May 20,000 June 24,500 92,650 33,000 85,150 LBJ Company Cash Budget For the Two Months of May and June Cash balance Add: Receipts Collections from customers Sale of plant assets Sale of new common stock Cash sales Total receipts Total Available Cash Less: Disbursements Purchases of inventory Operating expenses Selling and administrative expenses Equipment purchase Dividends Total disbursements Excess (deficiency of available cash over disbursements) Financing Borrowings Repayments Ending cash balance Please answer the 3 qualitative questions on the next tab called Qualitative Questions. 75,000 200,650 220,650 171,000 15,000 10,150 50,000 57,000 192,150 216,650 196,150 24,500 106,200 15,000 10,150 19,000 20,000 170,350 46,300 24,500 46,300 1) What are the three sections of a Cash Budget, and what is included in each section? The 3 sections of a cash budget are cash receipts, cash disbursements and financing. The cash receipts section includes expected receipts from the company’s principal source(s) of cash, such as cash sales and collections from customers on credit sales. This section also shows anticipated receipts of interest and dividends, and proceeds from planned sales of investments, plant assets, and the company’s capital stock. The cash disbursements section shows expected payments for inventory, labor, overhead, and selling and administrative expenses. It also includes projected payments for income taxes, dividends, investments, and plant a…

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