Use the Following Information to Prepare the June Cash Budget

question 80

Essay

Use the following information to prepare the June cash budget for Arbor Company. It should show expected cash receipts and cash disbursement for the month and the cash balance expected on June 30.
a. Beginning cash balance on June 1 is $52,000.
b. Cash receipts from sales: 40% is collected in the month of sale, 50% in the next month, and 10% in the second month after sale (uncollectible accounts are negligible and can be ignored). Sales amounts are: April (actual), $1,450,000, May (actual), $1,600,000, and June (budgeted), $1,700,000.
c. Payments on merchandise purchases: 80% in the month of purchase and 20% in the month following purchase. Purchases amounts are May (actual), $830,000; and June (budgeted), $867,000.
d. Budgeted cash disbursements for salaries in June: $260,000.
e. Budgeted depreciation expense for June: $24,000.
f. Other cash expenses budgeted for June: $282,000.
g. Accrued income taxes due in June: $48,000.
h. Bank loan interest due in June: $8,000.
i. Loan payment of $50,000 if the preliminary cash balance is greater than $100,000.

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Definitions:

Higher Interest Rate

A situation where lending rates are elevated, often leading to reduced borrowing and slower economic growth.

Financial Markets

Marketplaces where individuals and entities can trade financial securities, commodities, and other fungible assets.

Loanable Funds Market

A theoretical market where borrowers and lenders negotiate interest rates for loans, which determines the supply and demand for credit in the economy.

Scarce Resources

Refers to the limited availability of resources that are used for the production of goods and services; scarcity necessitates the need for allocation decisions.