(a) Prepare a schedule of budgeted cash collections for sales for each of the months July to September.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
The
Month Cash Sales Sales on Account Purchases on Account
May $45,000 $480,000 $390,000
June $60,000 $600,000 $360,000
July $38,000 $720,000 $450,000
August $47,000 $640,000 $400,000
September $51,000 $800,000 $500,000
i) An analysis of the records shows that trade receivables (accounts receivable) are settled according to the following credit pattern, in accordance with the credit terms 5/30, n90:
60% in the month of sale 20% in the first month following the sale 15% in the second month following the sale The remaining 5% is expected to be uncollectible.
ii) Accounts payable are settled as follows: 70% in the month in which the inventory is purchased 30% in the following month The credit terms of the suppliers - 10/30, n60.
iii) A motor vehicle costing $350,000 will be purchased and paid for in September 2010. At the same time, an old motor vehicle, which has a net book value of $80,000, will be disposed of at a profit of $60,000.
iv) A
v) Fixed operating expenses which accrue evenly throughout the year, are estimated to be $1,500,000 per annum, [including
vi) Other operating expenses are expected to be $96,000 per quarter and are settled monthly.
vii) Wages and salaries are expected to be $2,160,000 per annum and will be paid monthly.
viii) The business has made arrangements with their bankers for a loan of $240,000. The loan is expected to be disbursed in July 2010.
ix) Retooling of the production facility at the end of 2009 required new equipment costing $1,500,000 and is being paid for as follows:
January 2010 $200 000
April 2010 $500 000
July 2010 $450 000
October 2010 $350 000
x) The cash balance on June 30, 2010 is expected to be an overdraft of $190,000
Required:
(a) Prepare a schedule of budgeted cash collections for sales for each of the months July to September.
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