Homework SourseExercise 1413 Preparing a cash budget LO 145 The accountant
Exercise 14-13 Preparing a cash budget LO 14-5 The accountant for Rooney’s Dress Shop prepared the following cash budget. Rooney’s desires to maintain a cash cushion of $17,000 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 3 percent per month. Required Complete the cash budget by filling in the missing amounts. Determine the amount of net cash flows from operating activities Rooney’s will report on the third quarter pro forma statement of cash flows. Determine the amount of net cash flows from financing activities Rooney’s will report on the third quarter pro forma statement of cash flows.
Determine the amount of net cash flows from both operating and financing activities Rooney\'s will report on the third quarter pro forma statement of cash flows. (Round intermediate calculations and final answers to the nearest whole dollar amount.)
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Solution
Answer:
Cash Budget
July
August
September
Section 1: Cash receipts
Beginning cash balance
$49,000
$17,000
$17,000
Add cash receipts
193,000
213,000
253,600
Total cash available
242,000
230,000
270,600
Section 2: Cash payments
For inventory purchases
172,026
146,730
180,652
For S&A expenses
61,000
67,060
67,932
For interest expense
0
240.78
271.70
Total budgeted disbursements
233,026
214,031
248,856
Section 3: Financing activities
Surplus (shortage)
8,974
15,969
21,744
Borrowing (repayments)
8,026
1,031
-4,744
Ending cash balance
$17,000
$17,000
$17,000
Working notes for the above answer is as under
1
Interest calculation for the month of august
=8026 x 3% per month
=8026 x 3%
=240.78%
Interest calculation for the month of September
=(8026 +1031)x 3% per month
=9057 x 3%
=271.70%
2
Repayment in the month of September
=21744-17000
=$4744
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b
Cash flow from operating activities is
=cash receipts from customers - the total cash payments for inventory, S&A expense, and interest
=(193000+213000+253000) - (233026+214031+248856)
=659600- 695,912
=-36,312
net cash outflow from operating activity is = (36,312)
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Answer:c
Cash flow from financing activities
=the amount borrowed - repayments
=8026-1031-4744
=4312
Cash flow from financing activities =4312
| Cash Budget | July | August | September |
| Section 1: Cash receipts | |||
| Beginning cash balance | $49,000 | $17,000 | $17,000 |
| Add cash receipts | 193,000 | 213,000 | 253,600 |
| Total cash available | 242,000 | 230,000 | 270,600 |
| Section 2: Cash payments | |||
| For inventory purchases | 172,026 | 146,730 | 180,652 |
| For S&A expenses | 61,000 | 67,060 | 67,932 |
| For interest expense | 0 | 240.78 | 271.70 |
| Total budgeted disbursements | 233,026 | 214,031 | 248,856 |
| Section 3: Financing activities | |||
| Surplus (shortage) | 8,974 | 15,969 | 21,744 |
| Borrowing (repayments) | 8,026 | 1,031 | -4,744 |
| Ending cash balance | $17,000 | $17,000 | $17,000 |
