ACG 2021 Chapter 6: Financial Accounting Chapter 6 Notes
Get access
Related Documents
Related Questions
Preparing a Cash Budget
La Famiglia Pizzeria provided the following information for themonth of October:
Sales are budgeted to be $156,000. About 85% of sales is cash;the remainder is on account.
La Famiglia expects that, on average, 70% of credit sales willbe paid in the month of sale, and 28% will be paid in the followingmonth.
Food and supplies purchases, all on account, are expected to be$116,000. La Famiglia pays 25% in the month of purchase and 75% inthe month following purchase.
Most of the work is done by the owners, who typically withdraw$6,000 a month from the business as their salary. (Note:The $6,000 is a payment in total to the two owners, not perperson.) Various part-time workers cost $7,300 per month. They arepaid for their work weekly, so on average 90% of their wages arepaid in the month incurred and the remaining 10% in the nextmonth.
Utilities average $5,950 per month. Rent on the building is$4,100 per month.
Insurance is paid quarterly; the next payment of $1,600 is duein October.
September sales were $181,500 and purchases of food and suppliesin September equaled $130,000.
The cash balance on October 1 is $2,147.
Required:
If required, round your answers to the nearest dollar.
1. Calculate the cash receipts expected inOctober.
$
2. Calculate the cash needed in October to payfor food purchases.
$
3. Prepare a cash budget for the month ofOctober.
LaFamiglia Pizzeria | |
Cashbudget | |
Forthe month of October | |
Beginning balance | $ |
Cash receipts | |
Cash available | $ |
Less: | |
Payments for food and suppliespurchases | $ |
Owners' draw | |
Workers' wages | |
Utilities | |
Rent | |
Insurance | |
Total disbursements | $ |
Ending balance | $ |