Quiz 5
It is August 1, 2007. A firm expects sales over the next 4 months to be as follows:
Month
August
September
October
November
Sales Amount
$130,000
$80,000
$90,000
$95,000
Sales in June and July were $100,000 and $120,000 respectively. Twenty five percent of
these sales will be collected in the month of sale, 35% will be collected in the first month
after sale, and 40% will be collected two months after sale. A 3% discount is given for
accounts paid in the first month after sale. The firm purchases inventory of 70% of next
month’s expected sales for cash. Wages, taxes, and expenses are $45,000 per month.
Currently, $8,000 of cash is on hand. A minimum balance of $15,000 is required.
Complete a cash budget for August, September, and October.