CASE 2 (20 points)

The following data are available for the budget preparation of Russel Corporation:

Additional information:

Half the companys sales are transacted on a cash basis. The other half are paid for with a 1-month delay.

The company pays all of its credit purchases with a 1-month delay.

Credit purchases in June were 30.

Total sales in June were 180.

Cash balance at 1 July was 100.

Instructions:

a) Explain the role of cash budget. (5 points)

b) Using the above information, complete the following cash budget. (15 points) Note: You need to show separately your detailed calculations for cash collections

and payments for purchases.

July August September Total sales 200 220 180 Cash purchases 70 80 60 Credit purchases 40 30 40 Labor and administrative expenses 30 30 30 Taxes, interest, and dividends 10 10 10 Capital expenditures 100 0 0 July August September Beginning cash balance ? ? ? Cash receipts: Cash sales ? ? ? Cash collections from credit sales ? ? ? ? Total cash available ? ? ? Cash disbursements: Cash purchases ? ? ? Payments for credit purchases ? ? ? ? Labor and administrative expenses ? ? ? Capital expenditures ? ? ? Taxes, interest, and dividends ? ? ? Total cash disbursements ? ? ? Ending cash balance