The accountant for Solomons Dress Shop prepared the followin

The accountant for Solomon’s Dress Shop prepared the following cash budget. Solomon’s desires to maintain a cash cushion of $18,000 at the end of each month. Funds are assumed to be borrowed and repaid on the last day of each month. Interest is charged at the rate of 1 percent per month.

Determine the amount of net cash flows from operating activities Solomon’s will report on the third quarter pro forma statement of cash flows.

Determine the amount of net cash flows from financing activities Solomon’s will report on the third quarter pro forma statement of cash flows

cash budget:

Cash Budget	July	August	September
Section 1: Cash receipts
Beginning cash balance	$49,500	$18,000selected answer correct	$18,000selected answer correct
Add cash receipts	194,000	214,000	254,600
Total cash available	243,500	232,000selected answer correct	272,600selected answer correct
Section 2: Cash payments
For inventory purchases	172,526	147,230	181,152
For S&A expenses	61,500	67,560	68,432
For interest expense	0	85selected answer correct	94selected answer correct
Total budgeted disbursements	234,026	214,875selected answer correct	249,678selected answer correct
Section 3: Financing activities
Surplus (shortage)	9,474	17,125selected answer correct	22,922selected answer correct
Borrowing (repayments)	8,526	875selected answer correct	(4,922)selected answer correct
Ending cash balance	$18,000	$18,000	$18,000

Solution:

Net cash Flows from Operating Activities = Total Cash Receipts - Total Disbursement

= ($194000 +$214000+ $254600) - ($234026 + $214875 +$249678) = - $35,979

Net cash Flow from Financing Activities = Amounts Borrowed - Repayment of borrowings = ($8526 +$875) - $4922 = $4,479

The accountant for Solomon’s Dress Shop prepared the following cash budget. Solomon’s desires to maintain a cash cushion of $18,000 at the end of each month. Fu

The accountant for Solomons Dress Shop prepared the followin

Solution

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