ACDC Pty Ltd – Cash Budget

ACDC Pty Ltd needs a cash budget for the month of September 2019. The following information is available:

  1. The cash balance on September 1 is $7,500
  2. Actual sales for July and August, and expected sales for September      are:

July   August  September

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Cash sales  $5,000  $5,250  $6,500

Credit sales  25,000  30,000  35,000

Total sales  30,000  35,250  41,500

Credit sales are collected over a three-month period in the ratio of 60 percent, 30 percent, 9 percent, with 1 percent uncollectible.

  1. Purchases of inventory will total $18,000 for September. Seventy      percent of a month’s purchases are paid during the month of purchase.      Accounts payable for August purchases total $6,150, which will be paid in      September.
  2. Selling and administration expenses are budgeted at $14,000 for      September. Of this $5,000 is for depreciation.
  3. Dividends of $5,000 will be paid during September, and equipment      costing $12,000 will be purchased.
  4. The company must maintain a minimum of cash balance of $5,000. An      overdraft facility is available from the company’s bank to bolster the      cash position as needed.

Required: 

Prepare a cash budget for the month of September showing your supporting calculations and heading. Indicate in the financing section any borrowing that will be necessary during the month.