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

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.