43

Unit 4
Cash Budgeting 3

Paula’s Planning reported the following Budgeted Income Statement for the months of July,
August, September and October, 2013. Note that July 2013 was the first month of the
company’s existence, and that the owner deposited $5,000 on July 1 into the company’s bank
account to get things started.
a. Calculate and forecast for Paula’s Planning cash availability (for September to
December) given the following information.
b. Please compare each month’s EBIT figure with the ending cash balance. Are they the
same? Why or why not?

July August September October

Revenue Conference $47,900 $ 48,400 $ 49,880 $ 51,200

Revenue Catering $22,500 $21,900 $26,010 $30,080

Cost of sales $19,110 $18,392 $18,954 $19,456

Gross Profit

Cleaning Supplies + $21,900 $24,684 $25,439 $26,112

Equipment Depreciation
Expense

Linen Rental Expense $5,898 $5,921 $5,740 $5,962

Paper Supplies Expense $1,230 $1,630 $1,780 $1,600

Earnings Before Interest + Tax

 Of the Conference Revenue, 40% is received in the current month and the
remainder is received in the following month.
 Of the Catering Revenue, 100% is received in the current month
 Of the cost of sales, 80% is paid in the current month and the remainder is paid
in the following month
 Of the Cleaning Supplies Expense, 100% is paid in the current month
 Linen, and paper expenses are paid the month they are incurred.
 Depreciation expense is $300 per month.

43
 44

Paula’s Planning
Cash Availability
September to December 2013
Quarter
July August September October

Beginning Cash Balance

Cash Receipts:

Conference sales revenue

Collections from Accounts Receivable (in

Conference sales revenue)
Catering sales revenue

TOTAL CASH AVAILABLE

Cash Disbursements:

Cost of sales cash purchases

Payment of Accounts Payable

Cleaning expense

Linen expense

Depreciation expense

TOTAL CASH DISBURSEMENTS

ENDING CASH BALANCE FOR THE

PERIOD

44