Question

Here are some important figures from the budget of Crenshaw, Inc., for the second quarter of 2019:

April May June
Credit sales $402,000 $351,000 $439,000
Credit purchases 179,000 167,000 200,000
Cash disbursements Wages,
taxes, and expenses 79,700 75,200 103,900
Interest 9,400 9,400 9,400
Equipment purchases 33,000 5,500 147,000

The company predicts that 5 percent of its credit sales will never be collected, 35 percent of its sales will be collected in the month of the sale, and the remaining 60 percent will be collected in the following month. Credit purchases will be paid in the month following the purchase. In March 2019, credit sales were $329,000.

Using this information, complete the following cash budget.

April May June
Beginning cash balance $109,000
Cash receipts
Cash collections from credit sales
Total cash available

Answer 1

To complete the cash budget, we calculate cash collections from credit sales for Crenshaw, Inc. for each month by applying the company's collection pattern and then subtract cash disbursements to find the ending cash balance for each month.

Step-by-step explanation:

To complete the cash budget for Crenshaw, Inc., we need to calculate the cash collections from credit sales based on the company's collection pattern and combine those figures with other known cash inflows and outflows.

Cash collections from credit sales:

• April collections:
• 35% of April sales = 0.35 * $402,000 = $140,700
• 60% of March sales = 0.60 * $329,000 = $197,400
• Total April collections = $140,700 + $197,400 = $338,100
• May collections:
• 35% of May sales = 0.35 * $351,000 = $122,850
• 60% of April sales = 0.60 * $402,000 = $241,200
• Total May collections = $122,850 + $241,200 = $364,050
• June collections:
• 35% of June sales = 0.35 * $439,000 = $153,650
• 60% of May sales = 0.60 * $351,000 = $210,600
• Total June collections = $153,650 + $210,600 = $364,250

The total cash available each month is the sum of the beginning cash balance and cash collections. The cash disbursements (wages, taxes, expenses, interest, and equipment purchases) need to be subtracted to find the ending cash balance for each month.

Answer 2

Crenshaw, Inc.

Cash Budget for the months of April, May, and June:

April May June

Beginning cash balance $109,000 $325,000 $419,950

Cash receipts 140,700 122,850 153,650

Cash collections from credit sales 197,400 241,200 210,600

Total cash available $447,100 $689,050 $784,200

Cash disbursements:

Wages, taxes, and expenses 79,700 75,200 103,900

Interest 9,400 9,400 9,400

Equipment purchases 33,000 5,500 147,000

Purchases of goods 179,000 167,000

Total cash disbursements 122,100 269,100 427,300

Ending balance $325,000 $419,950 $356,900

Step-by-step explanation:

a) Data and Calculations:

Budget for the second quarter of 2019:

April May June

Credit sales $402,000 $351,000 $439,000

Credit purchases 179,000 167,000 200,000

Cash disbursements:

Wages, taxes, ^ expenses 79,700 75,200 103,900

Interest 9,400 9,400 9,400

Equipment purchases 33,000 5,500 147,000

Predictions:

Uncollectibles 20,100 17,550 21,950

Collections 381,900 333,450 417,050

Total credit sales $402,000 $351,000 $439,000

Cash Collections:

Month of sales 35% 140,700 122,850 153,650

Following month 60% 197,400 241,200 210,600

Total cash collections 338,100 364,050 364,250