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Exercise 20-32A Merchandising: Cash budget LO P4 Kelsey is preparing its master budget for the quarter ended September 30. Budgeted sales and cash payments for merchandise for the next three months follow: Budgeted Sales Cash payments for merchandise July $62,100 44,200 August $81,900 31,700 September $49,900 32,500 Sales are 15% cash and 85% on credit. All credit sales are collected in the month following the sale. The June 30 balance sheet includes balances of $14,200 in cash; $52,500 in accounts receivable; $6,400 in accounts payable; and a $3,900 balance in loans payable. A minimum cash balance of $13,900 is required. Loans are obtained at the end of any month when a cash shortage occurs. Interest is 2% 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 (5% of sales), office salaries ($5,900 per month), and rent ($8,400 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. September Beginning cash balance Cash sales Collections on account Total cash available For July, August, and September July August $ 14,200 9,315 52,500 76,015 Cash payments for: Merchandise Sales commissions Office salaries 44,200 3,105 5,900 8,400 Rent Interest on bank loan 61,683 14,332 $ Total cash payments Preliminary cash balance Additional loan (loan repayment) Ending cash balance Loan balance July $ 3,900 August September Loan balance - Beginning of month Additional loan (loan repayment) Loan balance - End of month

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