Problem: Cowboy's Bar and Grill is a family bar that operates on a cash basis. All sales are for cash, but materials necessary to the preparation of meals and drinks are bought on trade credit terms of 2/30 net 60. Sales forecast for the next six months is:
Jan 25000 Feb 30000 Mar 40000 Apr 50000 May 30000 Jun 25000 Material costs are about 20% of sales.
Labor is fixed at $10,000.00 per month and must be paid.
Rent is $1,550.00 per month.
Purchases in December were $6,000.00.
Taxes must be paid in January and are $12,000.00
Beginning cash in Jan above was $10,000.00
Target cash balance is $10,000.00
Cowboy's has a line of credit with the bank and wants to know their projected balance due to the bank on June 30th of the year.
Prepare a cash budget assuming that Cowboy's takes the discount.