The city of Charleston had the following sales of water for the selected months of 2016:

Month ___________________________Sales

February…………………………….....$50,000

March………………………………........45,000

April………………………………...........60,000

May………………………………….........42,500

June…………………………………........70,000

July………………………………..........120,000

All sales are on credit historically, 50 percent is collected in the month of sale, 35 percent during the first month following the sale, and 15 percent in the second month following the sale.

Water purchases by month are as follows:

Month _________________________Sales

February…………………..………..$37,500

March……………………….....………33,750

April……………………………........…45,000

May……………………………….........31,875

June……………………………….........52,500

July……………………………….90,000

Water is purchased in the month of sale. All purchases are paid during the month following the purchase.

Operating costs are $18,000 and everything is paid in cash except for depreciation, which totals $8,000 a month.

The city plans on purchasing some new equipment in May for $25,000 in exchange for a note payable.

The April 1 cash balance is expected to be the minimum balance of $5,000.

Money can be borrowed from a local bank in increments of $1,000. (Do not include interest charges in your budget.)

Required:

Prepare a cash budget for April, May, and June. (Check figures: ending cash balance for April, May and June are $14,500, $8,500 and $22,500 respectively.)

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