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The Gannon Company has budgeted sales revenues as follows:


Credit sales $27,000 $29,000 $18,000

Cash sales 18,000 51,000 39,000

Total sales $45,000 $80,000 $57,000

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Past experience indicates that 60% of the credit sales will be collected in the month of sale and the remaining 40% will be collected in the following month.

Purchases of inventory are all on credit and 50% is paid in the month of purchase and 50% in the month following purchase. Budgeted inventory purchases are:

June $60,000

July 50,000

August 21,000

Other cash disbursements budgeted: (a) selling and administrative expenses of $9,500 each month, (b) dividends of $22,700 will be paid in July, and (c) purchase of a computer in August for $5,000 cash.

The company MUST maintain a minimum cash balance of $10,000 at the end of each month. The company borrows money from the bank at 9% per year interest if necessary to maintain the minimum cash balance of $10,000. Borrowed money is repaid in months when there is an excess cash balance. The beginning cash balance on July 1 was $10,000 of which none is borrowed.


Prepare a cash budget for the months of July and August and Prepare separate schedules for expected collections from customers and expected payments for purchases of inventory.


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