Question

Question: Built-Tight is preparing its master budget for the quarter ended September 30, 2017. Budgeted sales and cash payments for product costs for the quarter follow:

Sales are 20% cash and 80% on credit. All credit sales are collected in the month following the sale. The June 30 balance sheet includes balances of \(15,000 in cash; \)45,000 in accounts receivable; \(4,500 in accounts payable; and a \)5,000 balance in loans payable. A minimum cash balance of \(15,000 is required. Loans are obtained at the end of any month when a cash shortage occurs. Interest is 1% per month based on the beginning-of-the-month loan balance and is paid at each month-end. If an excess balance of cash exists, loans are repaid at the end of the month. Operating expenses are paid in the month incurred and consist of sales commissions (10% of sales), office salaries (\)4,000 per month), and rent ($6,500 per month).

1. Prepare a cash receipts budget for July, August, and September.

2. Prepare a cash budget for each of the months of July, August, and September. (Round amounts to the dollar.)

Short answer

Thecash receipt budget is the type of schedule prepared by an organization that takes intoconsideration the total cash revenue during the period.

Step-by-step solution

(1) Cash receipts budget

Built-Tiger
Cash receipts budget
For the month of July, August and September
Particulars	July	August	September
Sales	$64,000	$80,000	$48,000
Less: Ending accounts receivables @80%	$51,200	$64,000	$38,400
Cash sales	$12,800	$16,000	$9,600
Add: Collections of prior month’s receivables	$45,000	$51,200	$64,000
Total cash receipts	$57,800	$67,200	$73,600

(2) Cash budget

Built-Tiger
Cash budget
For the month of July, August and September
Particulars	July	August	September
Beginning cash balance	$15,000	$15,000	$25,505
Add: Cash receipts	$57,800	$67,200	$73,600
Total cash available	$72,800	$82,200	$99,105
Cash payments for:
Direct materials	$16,160	$13,440	$13,760
Direct labor	$4,040	$3,360	$3,440
Overhead	$20,200	$16,800	$17,200
Sales commission @10%	$6,400	$8,000	$4,800
Office salaries	$4,000	$4,000	$4,000
Rent	$6,500	$6,500	$6,500
Interest on bank loan	$50	$46	$0
Total cash payments	$57,300	$52,100	$49,700
Preliminary cash balance	$15,450	$30,055	$49,405
Additional loan	$450	$4,550
Ending cash balance	$15,000	$25,505	$49,405