Omaha Office Supply's sales are 75% cash and 25% credit. (Use the rounded sales values.) Credit sales are collected in the month after the sale. Inventory purchases are paid 25% in the month of purchase and 75% the following month. Salaries and commissions are also paid half in the month earned and half the next month. Income tax is paid at the end of the year.
Omaha Office Supply has assembled the following data:
a. Sales in April were $42,000. You forecast the monthly sales will increase 2.0% in May and 2.4% in June.
b. Omaha maintains inventory of $10,000 plus 25% of the sales revenue budgeted for the following month. Monthly purchases average 50% of sales revenue in the same month. Actual inventory on April 30 is $13,000. Sales budgeted for July are $50,000.
c. Monthly salaries amount to $4,000. Sales commissions equal 4% of sales for that month. Combine salaries and commissions into a single figure.
d. Other monthly expenses are as follows:
Rent expense: $2,800, paid as incurred
Depreciation expense: $600
Insurance expense: $300, expiration of prepaid amount
Income tax: 20% of operating income
Budgeted May sales are $42,800 and June sales are $43,800
The April 30,2011, balance sheet showed the following balances:
Cash = $25,000
Accounts payable = $50,000
Salaries and commissions payable = $2,850
Requirements
1. Prepare schedules of budgeted cash collections, budgeted cash payments for purchases, and budgeted cash payments for operating expenses. Show amounts for each month and totals for May and June. Round computations to the nearest dollar. Sales in April were $42,000.
2. Prepare a cash budget. If no financing activity took place, what is the budgeted cash balance on June 30, 2011?