cash budget--Corporation tax

[ajmom88]

Working on a cash budget and I am down to the corporation tax. I know taxes associated with payroll are listed under cash distribution but is corporation tax also listed there.

If it corporation tax is to be listed in the cash distribution and the tax rate is 40% is this done on sales for the month. The problem is not specific on anything concerning that the corporation tax rate is 40% and no corporate taxes are paid in September.

Can someone help with this problem.

 

[stapel]

Please provide the exact text of the exercise and its instructions. Thank you!

 

[ajmom88]

exact text of the exercise and its instructions.

The ZYX Corporation is planning to request a line of credit from its bank and wants to estimate its cash needs for the month of September. The following sales forecasts have been made for 2005.

July $500,000
August $400,000
September $300,000
October $200,000
November $100,000

Collection estimates were obtained from the credit collection department as follows: 20% collected within the month of sale; 70% collected the first month following the sale; and 10% collected the second month following the sale. Payments for labor and raw materials are typically made in the month in which these costs are incurred. Total labor and raw material costs each month are 50% of sales. General administrative expenses are $30,000 per month, lease payments are $10,000 per month, and depreciation charges are $20,000 per month. The corporation tax rate is 40% ; however, no corporate taxes are paid in September. Prepare a cash budget for September.

 

[Denis]

It is clearly stated thay no corporate tax is paid in September; so whatever the amount is will be paid LATER;
so simply skip this item since you're doing the cash needs for September.
You'd also not use depreciation of $20,000 as it is not a cash outlay during September.
(but of course you'd use it to calculate the corporate tax to be paid LATER)

So cash in: 50,000 + 280,000 + 60,000 = 390,000 (from Jul,Aug,Sep sales)
cash out : 150,000 + 30,000 + 10,000 = 190,000
Net cash: 390,000 - 190,000 = 200,000