Transcript Company is preparing a cash budget for June. The company has $125,000 cash at the beginning
Question:
Transcript Company is preparing a cash budget for June. The company has $125,000 cash at the beginning of the month and anticipates having total sales of $1,222,000, consisting of 25% cash sales and 75% credit card sales. The bank charges 3 percent for credit card deposits. The firm sets its selling price at 150 percent of the cost of purchases and pays the cost of each month's sales at the end of the month.
Other cash disbursements are $66,000 per month, 4 percent of the total sales and the cash
purchase of a new tractor for $125,000. In addition, a $545,000 note will be due this month for
equipment purchased last year. Transcript Company has an agreement with its bank to maintain
a cash balance of $125,000.
Required:
What is the cash balance and what amount, if any, must the company borrow during June?
Beginning cash balance | $125,000 |
Cash receipts:- | |
Cash sales = 1,222,000* 25% | $305,500 |
Credit card sales = 1,222,000*75%*97% | $889,005 |
Total Cash Available | $1,319,505 |
Cash disbursements: | |
Note payable | $545,000 |
Purchases = 1,222,000/ 150% | $814,667 |
Other cash expenses: | |
Fixed expenses | $66,000 |
Variable expenses = 1,222,000*4% | $48,880 |
Total Cash disbursements | $1,474,547 |
Cash shortage | $155,042 |
Required minimum balance | $125,000 |
Required borrowing | $280,042 |
Accounting
ISBN: 978-1118608227
9th edition
Authors: Lew Edwards, John Medlin, Keryn Chalmers, Andreas Hellmann, Claire Beattie, Jodie Maxfield, John Hoggett