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Prepare Cash Budget

Coulson Industries is developing a cash budget for October through December. They forecast sales of $400,000, $300,000, and $200,000 for those months respectively. They also have expenses including purchases, rent, wages, taxes, machinery purchases, interest payments, dividends, and loan payments due during this period. They provided additional data on the payment terms and percentages of purchases and sales, as well as fixed monthly expenses, to prepare the cash budget.

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Hassan Shahid
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624 views1 page

Prepare Cash Budget

Coulson Industries is developing a cash budget for October through December. They forecast sales of $400,000, $300,000, and $200,000 for those months respectively. They also have expenses including purchases, rent, wages, taxes, machinery purchases, interest payments, dividends, and loan payments due during this period. They provided additional data on the payment terms and percentages of purchases and sales, as well as fixed monthly expenses, to prepare the cash budget.

Uploaded by

Hassan Shahid
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Coulson Industries, a defense contractor, is developing a cash budget for October, November,

and December. Coulsons sales in August and September were $100,000 and $200,000,
respectively. Sales of $400,000, $300,000, and $200,000 have been forecast for October,
November, and December, respectively. Historically, 20% of the firms sales have been for
cash, 50% have generated accounts receivable collected after 1 month, and the remaining
30% have generated accounts receivable collected after 2 months. Bad-debt expenses
(uncollectible accounts) have been negligible. In December, the firm will receive a $30,000
dividend from stock in a subsidiary.
Coulson Industries has gathered the following data needed for the preparation of a cash
disbursements schedule for October, November, and December.
Purchases: The firms purchases represent 70% of sales. Of this amount, 10% is paid in
cash, 70% is paid in the month immediately following the month of purchase, and the
remaining 20% is paid 2 months following the month of purchase.
Rent payments: Rent of $5,000 will be paid each month.
Wages and salaries: Fixed salaries for the year are $96,000, or $8,000 per month. In
addition, wages are estimated as 10% of monthly sales.
Tax payments: Taxes of $25,000 must be paid in December.
Fixed-asset outlays: New machinery costing $130,000 will be purchased and paid for in
November.
Interest payments: An interest payment of $10,000 is due in December.
Cash dividend payments: Cash dividends of $20,000 will be paid in October.
Principal payments (loans): A $20,000 principal payment is due in December.
Repurchases or retirements of stock: No repurchase or retirement of stock is expected
between October and December.

Note: September end cash Balance is Rs. 50000, Notes Payable & Marketable Securities
equal zero and company wishes to maintain Rs. 25000 reserve cash balance each month.
Required: Prepare Cash Budget for Coulson Industries

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