Question

Use the following information to prepare the September cash budget for PTO Manufacturing Co. The following information relates to expected cash receipts and cash payments for the month ended September 30.

a. Beginning cash balance, September 1, \(40,000.

b. Budgeted cash receipts from sales in September, \)255,000.

c. Raw materials are purchased on account. Purchase amounts are: August (actual), \(80,000; and September (budgeted), \)110,000. Payments for direct materials are made as follows: 65% in the month of purchase and 35% in the month following purchase.

d. Budgeted cash payments for direct labor in September, \(40,000.

e. Budgeted depreciation expense for September, \)4,000.

f. Other cash expenses budgeted for September, \(60,000.

g. Accrued income taxes payable in September, \)10,000.

h. Bank loan interest payable in September, $1,000.

Short answer

The ending cash balance at the end of September will be $95,500.

Step-by-step solution

Introduction

Depreciation expense is the type of expenditure that is levied on the fixed assets that decreases its value overtime.

Cash budget

PTO Manufacturing Co
Cash budget
For the month of September
Particulars		Amount
Beginning cash balance	$40,000
Add: Cash receipts from sales	$255,000
Total cash available		$295,000
Less: Cash payments
Direct materials	$99,500
Direct labor	$40,000
Other expense	$60,000
Accrued income tax	$0
Interest on bank loan	$0
Total cash payments		$199,500
Ending cash balance		$95,500