Built-Tight is preparing its master budget for the quarter ended September 30. Budgeted sales and cash payments for product costs for the quarter follow: sales$64,000 $80,000 $48,000 Budgeted cash payments for Direct materials 16,160 13,440 13,760 Direct labor 4,040 3,360 3,440 Factory overhead 20,200 16,800 17,200 Sales are 20% cash and 80% on credit. All credit sales are collected in the month following the sale. The June 30 balance sheet includes balances of $15,000 in cash; $45,000 in accounts receivable; and a $5,000 balance in loans payable. A minimum cash balance of $15,000 is required. Loans are obtained at the end of any month when a cash shortage occurs. Interest is 1% per month based on the beginning-of-the-month loan balance and is paid at each month-end. If an excess balance of cash exists, loans are repaid at the end of the month. Operating expenses are paid in the month incurred and consist of sales commissions (10% of sales), office salaries ($4,000 per month), and rent ($6,500 per month).rev: 03_17_2020_QC_CS-2046792. Prepare a cash budget for each of the months of July, August, and September.

Answer and Explanation:

The Preparation of cash budget for each of the months of July, August, and September is shown below:-

                                              Cash budget

                             For the month of July, August and September

                                             July           August          September

Beginning cash balance   $15,000      $15,000         $25,505

Cash receipts from

customer (Working note) $57,800      $67,200        $73,600

Total cash available         $72,800      $82,200       $99,105

Less:

Cash disbursements

Direct Materials                 $16,160         $13,440         $13,760

Sales commission             $6,400         $8,000          $4,800

(10% of sales)

Office salaries                   $4,000          $4,000          $4,000

Rent                                    $6,500         $6,500          $6,500

Direct Labor                       $4,040         $3,360           $3,440

Overhead Cost                 $20,200       $16,800         $17,200

Interest on bank loan    

For July (5,000 × 1%)             $50  

For August                                                  $46            

($5,000 - $4,550) × 1%))

For September                                                                  $0

Preliminary Cash

balance                                    $15,450    $30,055      $49,405

Repayment of loan to

Bank                                          $450        $4,550

                                                                ($5,000 - $450)

Ending cash balance              $15,000     $25,505     $49,405

Working Note

The ending balance of the particular month should be treated as a opening balance of next month

August ending balance will be forwarded in Sept as a opening balance.

Working Note

                                        July           August          September

Sales                            $64,000      $80,000            $48,000

Less:

Ending accounts

receivable

(80% of sales)            $51,200       $64,000             $38,400

Cash sales                 $12,800        $16,000              $9,600

Last month cash

collection                   $45,000         $51,200          $64,000

Cash receipts from

customer                    $57,800      $67,200        $73,600

Therefore we added the cash receipts as it increase the cash balance and deduct all cash payment as it decrease the cash balance