[ALR322]

Problem
The Shelby Company is in the building construction business. In 2001 it is expected that 40 percent of a month’s sales will be collected in cash, with the balance being received the following month. Of the purchases, 50 percent are paid the following month, 30 percent are paid in two months, and the remaining 20 percent are paid during the month of purchase.
The sales force receives $2,000 a month base pay plus a 2 percent commission (received in the month following the sale). Labor expenses are expected to be $3,000 a month for all of the other employees. Other operating expenses are expected to be $2,500 a month, including $500 for depreciation. The ending cash balance for 2000 was $5,500.

Sales Purchases
2000 – Actual
November $80,000 $70,000
December $90,000 $80,000

2001 – Budgeted
January $70,000 $50,000
February $90,000 $60,000
March $40,000 $70,000

Required: Prepare a cash budget and determine the projected ending cash balances for the first three months of 2001.





The rest is how i worked out my answers for the cash budget and my cash budget can someone please check it?
Payment of Purchases
November December January February March
November (70,000) x .20 = 8,000 x .50 = 35,000 x .30 = 21,000 --- ---
December (80,000) 0 x .20 = 16,000 x .50 = 40,000 x .30 = 24,000 ---
January (50,000) 0 0 x .20 = 10,000 x .50 = 25,000 x .30 = 15,000
February (60,000) 0 0 0 x .20 = 12,000 x .50 = 30,000
March (70,000) 0 0 0 0 x .20 = 14,000
Total for each Month 8,000 51,000 71,000 61,000 59,000


Cash Receipts From Sales
December January February March
Sales 90,000 70,000 90,000 40,000
Less Acct R. 60% 54,000 42,000 54,000 24,000
Cash Receipt From
Cash Sales 40% 28,000 36,000 16,000
Collection Prior R. 54,000 42,000 54,000
Total Cash Reciepts 82,000 78,000 70,000










Selling Expense Budget January February March Totals
Budgeted Sales 70,000 90,000 40,000 200,000
Sales Commission Percent 2% 2% 2% x 2%
Sales Commissions 1,400 1,800 800 4,000
Sales Monthly Base Pay Salary 2,000 2,000 2,000 6,000
Projected Selling Expense 3,400 3,800 2,800 $ 10,000














Shelby Company
Cash Budget
For the three months ending March 31, 2001
2001
January February March
Cash Receipts:
Beginning Cash Balance 5,500 7,600 15,300
Cash Receipts from Customers 82,000 78,000 70,000

Total Cash Receipts 87,500 85,600 85,300

Cash Payments:
Payments for Purchases 71,000 61,000 59,000
Sales Commissions 1,400 1,800 800
Salaries
Sales 2,000 2,000 2,000
Labor 3,000 3,000 3,000
Operating Expenses 2,000 2,000 2,000
General and Admin Expense 500 500 500


Total Cash Payments 79,900 70,300 67,300

Cash Increase (Decrease) Increase Increase Decrease
Beginning Cash Balance 5,500 7,600 15,300
Ending Cash Balance 7,600 15,300 18,000