Sutter, Inc. is a wholesaler for its only product, deluxe wireless rechargeable electric shavers, which sell for $73 each and cost Sutter $51 each. On June 1, 2016, Sutter’s management requested a cash budget for June. The following selected account balances at May 31, 2016, were gathered by the accounting department:
Actual sales for April and May were 30,000 and 50,000 units, respectively. Projected unit sales for June and July are 40,000 and 20,000, respectively. Experience indicates that 50% of sales should be collected in the month of sale, 30% in the month following sale, and the balance in the second month following sale. Uncollectible accounts, returns, and allowances are negligible.
Planned purchases should provide ending inventories equal to 30% of next month’s unit sales volume. Approximately 60% of the purchases are paid for in the month of purchase and the balance in the following month.
Monthly operating expenses are budgeted at $8.70 per unit sold plus a fixed amount of $288,000 including depreciation of $112,000. Except for depreciation, 70% of operating expenses are paid in the month incurred and the balance in the following month. Interest expense is included in operating expenses.
Special anticipated June transactions include the following:
1. Declaration of a $60,000 cash dividend to be paid 2 weeks after the June 20 date of record.
2. Sale of all but $40,000 of the marketable securities held on May 31 a gain of $18,000 is anticipated.
3. Payment of $50,000 installment on the note payable.
4. Trade-in of an old company plane originally costing $300,000 and now having accumulated depreciation of $200,000 at a gain of $160,000 on a new plane costing $2,060,000. Sufficient cash will be paid at the time of trade-in so that only 50% of the total price will have to be financed.
5. Sutter’s treasurer has a policy of maintaining a minimum month-end cash balance of $40,000 and has a standing arrangement with the bank to borrow any amount up to a limit of $400,000.
Prepare a cash budget for Sutter, Inc., for June 2016.
Collections in June from customers
Payments on account for merchandise purchases:
Payment of operating expenses:
Cash required at time of plane purchase:
