16.07.2022 - 10:42

# The following information is budgeted for McCracken Plumbing Supply Corporation for next quarter: April May June Sales $110,000$130,000 $180,000 Merchandise purchases$85,000 $92,000$105,000 Selling

Question:

The following information is budgeted for McCracken Plumbing Supply Corporation for next quarter:

April May June
Sales $110,000$130,000 $180,000 Merchandise purchases$85,000 $92,000$105,000
Selling and administrative expenses $50,000$50,000 $50,000 All sales at McCracken are on credit. Forty percent are collected in the month of sale, 58% in the month following the sale, and the remaining 2% are uncollectible. Merchandise purchases are paid in full the month following the month of purchase. The selling and administrative expenses above include$8,000 of depreciation on display fixtures and warehouse equipment. All other selling and administrative expenses are paid as incurred. McCracken wants to maintain a cash balance of $15,000. Any amount below this can be borrowed from a local bank as needed in increments of$1,000. All borrowings are made at month end.

Required:

Prepare McCracken’s cash budget for May. McCracken expects to have $24,000 of cash on hand at the beginning of May. Answers (1) • April 1, 2023 в 14:49 McCracken's Cash Budget for May: Beginning Cash Balance:$24,000 Add: Collections on April sales (40%*110,000): $44,000 Collections on May sales (58%*130,000):$75,400 Total Cash Available: $143,400 Less: Merchandise Purchases:$92,000 Selling and Administrative Expenses (excluding depreciation): $42,000 Loan Payment (if necessary):$0 Total Cash Payments: $134,000 Ending Cash Balance:$9,400 Explanation: The cash budget is a financial tool used to predict a company's cash inflows and outflows for a particular period. In this case, we are preparing the cash budget for McCracken Plumbing Supply Corporation for the month of May. The beginning cash balance is given as $24,000. We then calculate the cash inflows for May, which includes collections on April sales and May sales. The collections are given as 40% of April sales and 58% of May sales, respectively. This gives us a total cash available of$143,400. Next, we calculate the cash outflows for May, which includes merchandise purchases, selling and administrative expenses (excluding depreciation) and loan payments (if necessary). The total cash payments for May are given as $134,000. Finally, we subtract the total cash payments from the total cash available to arrive at the ending cash balance, which is$9,400. Since McCracken wants to maintain a cash balance of $15,000, it may need to borrow from a local bank as needed towards the end of the month. Do you know the answer? Not sure about the answer? Find the right answer to the question The following information is budgeted for McCracken Plumbing Supply Corporation for next quarter: April May June Sales$110,000 $130,000$180,000 Merchandise purchases $85,000$92,000 \$105,000 Selling by subject Business, and if there is no answer or no one has given the right answer, then use the search and try to find the answer among similar questions.
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