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Chapter 9 Comprehensive Assignment - Accounting 116 Due In Class Wednesday, May 12th, by 6:00pm You have just been hired as a management trainee by...

What is the cash budget sheet?

Chapter 9 Comprehensive Assignment – Accounting 116 Due In Class Wednesday, May 12 th , by 6:00pm You have just been hired as a management trainee by Cravat Sales Company, a nationwide distributor of a designer's silk ties. The company has an exclusive franchise on the distribution of the ties, and sales have grown so rapidly over the last few years that it has become necessary to add new members to the management team. You have been given responsibility for all planning and budgeting. Your first assignment is to prepare a master budget for the next three months, starting April 1. You are anxious to make a favorable impression on the president and have assembled the information below. The company desires a minimum ending cash balance each month of $10,000. The ties are sold to retailers for $10 each. Recent and forecasted sales in units are as follows: January (actual) 22,000 June 45,000 February (actual) 21,000 July 38,000 March (actual) 24,000 August 37,000 April 35,000 September 33,000 May 32,000 The large buildup in sales before and during June is due to Father's Day. Ending inventories are supposed to equal 30% of the next month's sales in units. The ties cost the company $4 each. Purchases are paid for as follows: 60% in the month of purchase and the remaining 40% in the following month. All sales are on credit, with no discount, and payable within 15 days. The company has found, however, that only 20% of a month's credit sales are collected by month-end. An additional 70% is collected in the following month, and a remaining 9% is collected in the second month following sale. Bad debts are thus 1% of credit sales. The company's monthly operating expenses are given below: 1
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2 Variable: Sales commissions 2% of sales Fixed: Wages and salaries $36,000 Utilities $19,000 Insurance $4,000 Depreciation $3,500 Miscellaneou s $2,000 All operating expenses are paid during the month, in cash, with the exception of depreciation and insurance expired. Equipment is purchased for cash in April for $55,000. Land will be purchased for $195,000 with the first payment made during May for $145,000 cash and the remainder of $50,000 paid in June. The company declares dividends of $25,000 each quarter, payable in the first month of the following quarter. The company's balance sheet at March 31 is given below: 2
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