Cruises Inc Past Experience Indicates That 60% of the Credit Sales Will

Cruises Inc. has budgeted sales revenues as follows: $\begin{array}{lccc} & \text { June } & \text { July } & \text { August } \\ \text { Credit sales } & \$ 135,000 & \$ 125,000 & \$ 90,000 \\\text { Cash sales } & 90,000 & 255,000 & 195,000 \\ \text { Total sales } & \$ 225.000 & \$ 380,000 & \$ 285,000 \\\end{array}$ Past experience indicates that 60% of the credit sales will be collected in the month of sale and the remaining 40% will be collected in the following month. Purchases of inventory are all on credit and 50% is paid in the month of purchase and 50% in the month following purchase. Budgeted inventory purchases are: $$\begin{array} { l r } \text { June } & \$ 300,000 \\\text { July } & 240,000 \\\text { August } & 105,000\end{array}$$ Other cash disbursements budgeted: (a) selling and administrative expenses of $48000 each month (b) dividends of $103000 will be paid in July and (c) purchase of equipment in August for $30000 cash.
The company wishes to maintain a minimum cash balance of $50000 at the end of each month. The company borrows money from the bank at 6% interest if necessary to maintain the minimum cash balance. Borrowed money is repaid in months when there is an excess cash balance. The beginning cash balance on July 1 was $50000. Assume that borrowed money in this case is for one month.
Instructions
Prepare a cash budget for the months of July and August. Prepare separate schedules for expected collections from customers and expected payments for purchases of inventory.