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Francis and Company has planned a cash budget for the third quarter of 2004. The cash balance on July 1, 2004 is expected to be an overdraft of $82,000.

Extracts from the sales and purchases budgets are as follows:

Month

Budgeted Sales

Budgeted Purchases

May

$800,000

June

$900,000

$600,000

July

$750,000

$550,000

August

$650,000

$450,000

September

$800,000

$500,000

i) All sales are on credit and an analysis of the records shows that debtors settle according to the following pattern, in accordance with the credit terms 5/30, n90:

50% in the month of sale

30% in the month following sale

20% the following month

ii) All purchases are on credit and past experience shows that 80% are settled in the month of purchase in order to take advantage of a 10% prompt settlement discount. The balance will be disbursed in the month after purchase.

The credit terms of the suppliers - 10/30, n60.

iii) Wages and salaries are expected to be $1,800,000 per annum and are paid monthly.

iv) Fixed operating expenses, which accrue evenly throughout the year, are estimated to be $2,400,000 per annum, (including depreciation on fixed assets of $60,000 per month) and is settled monthly.

v) Taxation of $80,000 has to be settled in August.

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