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(solution) Grenoble Enterprises had sales of $50,000 in March and $60,000 in


Grenoble Enterprises had sales of $50,000 in March and

$60,000 in April. Forecast sales for May, June, and July are $70,000, $80,000, and

$100,000, respectively. The firm has a cash balance of $5,000 on May 1 and wishes

to maintain a minimum cash balance of $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% of sales for cash, 60% are collected in the next month,

and the remaining 20% are collected in the second month following sale.

(2) The firm receives other income of $2,000 per month.
(3) The firm?s actual or expected purchases, all made for cash, are $50,000,
$70,000, and $80,000 for the months of May through July, respectively.
(4) Rent is $3,000 per month.
(5) Wages and salaries are 10% of the previous month?s sales.
(6) Cash dividends of $3,000 will be paid in June.
(7) Payment of principal and interest of $4,000 is due in June.
(8) A cash purchase of equipment costing $6,000 is scheduled in July.
(9) Taxes of $6,000 are due in June.

 


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