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27/08/2022
Hello I have a question in my Cost Accounting homework that has me really stuck can you please explain how to get the answer to this problem?
1. The city of Charleston had the following sales of water for the selected months of 2016:
Month Sales
February $50,000
March 45,000
April 60,000
May 42,500
June 70,000
July 120,000
All sales are on credit. Historically, 50 percent is collected in the month of sale, 35 percent during
the first month following the sale, and 15 percent in the second month following the sale.
Water purchases by month are as follows:
Month Sales
February $37,500
March 33,750
April 45,000
May 31,875
June 52,500
July 90,000
Water is purchased in the month of sale. All purchases are paid during the month following the
purchase.
Operating costs are $18,000 and everything is paid in cash except for depreciation, which
totals $8,000 a month.
The city plans on purchasing some new equipment in May for $25,000 in exchange for a
note payable.
The April 1 cash balance is expected to be the minimum balance of $5,000.
Money can be borrowed from a local bank in increments of $1,000. (Do not include interest
charges in your budget.)
Required:
Prepare a cash budget for April, May, and June. (Check figures: ending cash balance for April,
May and June are $14,500, $8,500 and $22,500 respectively.)
SOLUTION:Sales BudgetFeb Mar April May June July Net Sales Revenue (in $) – Actual $ 50,000 $ 45,000 $ 60,000 $ 42,500 $ 70,000 $ 120,000 Collection During the month of sale 50%Collection During…
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