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ACCT504 Case Study 3 on Cash Budgeting




Question;ACCT504;Case Study 3 on Cash Budgeting;The cash;budget was covered during Week 4 when we covered TCO D and you read Chapter 7.;There is also a practice case study to work on. Your professor will provide the;solution to the practice case study at the end of Week 5. This case study should;be uploadedby 11:59 p.m.mountain time on Sunday at the end of Week 6 to the Week;6 AssignmentDropbox. You are encouraged to use the Excel template file provided;in Doc Sharing.;The LBJ Company has budgeted sales revenues as follows.;April May June;Credit sales $94,000 $89,500 $75,000;Cash sales 48,000 75,000 57,000;Total sales $142,000 $164,500 $132,000;Past experience indicates that 30% of the credit sales;will be collected in the month of sale and the remaining 70% will be collected;in the following month.;Purchases of inventory are all on credit and 40% is paid;in the month of purchase and 60% in the month following purchase. Budgeted;inventory purchases are $195,000 in April, $135,000 in May, and $63,000 in June.;Other budgeted cash receipts: (a) sale of plant assets;for $33,000 in May, and (b) sale of new common stock for $50,000 in June. Other;budgeted cash disbursements: (a) operating expenses of $15,000 each month, (b);selling and administrative expenses of $10,150 each month, (c) purchase of equipment;for $35,000 cash in May, and (d) dividends of $20,000 will be paid in June.;The company has a cash balance of $20,000 at the;beginning of May and wishes to maintain a minimum cash balance of $20,000 at;the end of each month. An open line of credit is available at the bank and;carries an annual interest rate of 10%. Assume that all borrowing is done on;the first day of the month in which financing is needed and that all repayments;are made on the last day of the month in which excess cash is available.Also;assume that there is no outstanding financing as of May 1.;Requirements;1. Use this information to prepare a cash budget for the;months of May and June, using the template provided in DocSharing.;2. What are the three sections of a cash budget, and;what is included in each section?;3. Why is a cash budget so vital to a company?;4. What are the five basic principles of cash management;that a company can follow in order to improve its chances of having adequate;cash?;Grading Rubric for Cash Budget Case Study;Category;Points;%;Description;Documentation;and Formatting;6;10%;Case Study worksheet will be done in Excel;and will contain formulas to receive maximum credit.;Organization;and Cohesiveness;6;10%;A quality solution will include the content properly;organized in accordance with the instructions provided. The cash budgets will;be complete and the analysis will be consistent with the cash budgets;presented.;Editing;6;10%;Quality work will be free of any mathematical, spelling;punctuation, or grammatical errors. Sentences and paragraphs (where appropriate) will;be clear, concise, and factually correct.;Content;42;70%;A quality project will have all required work completed and will;be correct.;Total;60;100%;A quality project will meet or exceed all of the;requirements.


Paper#45210 | Written in 18-Jul-2015

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