The city of Coventry had the following sales of water for the selected months of 2011: All sales are on credit. Historically, 50 per cent is collected in the month of sale, 35 per cent during the first month following the sale, and 15 per cent in the second month following the sale.
Cost of water averages 75 per cent of sales. Water is purchased in the month of sale. All purchases are paid during the month following the purchase.
Operating costs of £40,000 are paid each month.
The March 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 March, April, and May.

Question

The city of Coventry had the following sales of water for the selected months of 2011:  All sales are on credit. Historically, 50 per cent is collected in the month of sale, 35 per cent during the first month following the sale, and 15 per cent in the second month following the sale.
Cost of water averages 75 per cent of sales. Water is purchased in the month of sale. All purchases are paid during the month following the purchase.
Operating costs of £40,000 are paid each month.
The March 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 March, April, and May.

Quizplus · Accepted Answer

The Answer of The city of Coventry had the following sales of water for the selected months of 2011:  All sales are on credit. Historically, 50 per cent is collected in the month of sale, 35 per cent during the first month following the sale, and 15 per cent in the second month following the sale.
Cost of water averages 75 per cent of sales. Water is purchased in the month of sale. All purchases are paid during the month following the purchase.
Operating costs of £40,000 are paid each month.
The March 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 March, April, and May.

The City of Coventry Had the Following Sales of Water