Gulf Company, a successful retailer located in Qatar, ispreparing its budget for the upcoming quarter. The following dataand information are available for the months of April, May, andJune 2019.
- Budgeted sales and expenses for the period:
April May June
Sales...................................................$400,000 $600,000 $500,000
Merchandise Purchases.......................240,000 360,000 300,000
Administrative Expenses.......................18,000 18,000 16,000
Insurance Payments...............................30,000 30,000 30,000
Advertising..........................................140,000 153,000 100,000
Machinery Purchases.............................16,000 ------- -------
Depreciation Expense............................20,000 20,000 20,000
- All sales are on account. 20% of a month’s sales are collectedin the month of the sale, 75% is collected in the month followingthe sale, and 5% is collected in the second month following thesale.
- Accounts receivable on April 1 will be $303,000, of which$282,000 will be collected during April and $21,000 will becollected during May.
- Merchandise purchases are paid in full in the month followingthe purchase. The March 31 accounts payable balance of $216,000 formerchandise purchases will be paid in April.
- The cash balance on April 1 is budgeted to be $52,000.
- The company requires a minimum cash balance of $50,000 at theend of each month. The company may borrow any amount from a localbank at the beginning of a month and will make repayments at theend of a month. The yearly interest rate is 5% and interestpayments are due on any principal at the time it is repaid. Forsimplicity, assume that interest is not compounded.
Required:
- Prepare a Schedule of Expected Cash Collections for April, May,June, and for the quarter in total.
- Prepare a Cash Budget for April, May, June, and for the quarterin total.
