Ghada Enterprises had sales of US$50,000 in March and US$60,000 in April. Forecast sales for May, June, and July are US$70,000, US$80,000, and US$100,000, respectively. The firm has a cash balance of US$5,000 on May 1 and wishes to maintain a minimum cash balance of US$5,000. Given the following data, prepare and interpret a cash budget for the months of May, June, and July.
1. The firm makes 20 percent of sales for cash, 60 percent are collected in the next month, and the remaining 20 percent are collected in the second month following sale.
2. The firm receives other income of US$2,000 per month.
3. The firm's actual or expected purchases, all made for cash, are US$50,000, US$70,000, and US$80,000 for the months of May through July, respectively.
4. Rent is US$3,000 per month.
5. Wages and salaries are 10 percent of the previous month's sales.
6. Cash dividends of US$3,000 will be paid in June.
7. Payment of principal and interest of US$4,000 is due in June.
8. A cash purchase of equipment costing US$6,000 is scheduled in July.
9. Taxes of US$6,000 are due in June.