Preparing a financial budget—schedule of cash receipts and schedule of cash payments Agua Cool is a distributor of bottled water. For each of the items, compute the amount of cash receipts or payments Agua Cool will budget for September. The solution to one item may depend on the answer to an earlier item. Management expects to sell equipment that cost $14,000 at a gain of $7,000. Accumulated depreciation on this equipment is $55,000. Management expects to sell 7,100 cases of water in August and 9,000 cases in September. Each case sells for $14. Cash sales average 20% of total sales, and credit sales make up the rest. Three-fourths of credit sales are collected in the month of the sale, with the balance collected the following month. The company pays rent and property taxes of $4,500 each month. Commissions and other selling expenses average 30% of sales. Agua Cool pays one—half of commissions and other selling expenses in the month incurred, with the balance paid the following month.
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.
Preparing a financial budget—schedule of cash receipts and schedule of cash payments
Agua Cool is a distributor of bottled water. For each of the items, compute the amount of cash receipts or payments Agua Cool will budget for September. The solution to one item may depend on the answer to an earlier item.
- Management expects to sell equipment that cost $14,000 at a gain of $7,000. Accumulated
depreciation on this equipment is $55,000. - Management expects to sell 7,100 cases of water in August and 9,000 cases in September. Each case sells for $14. Cash sales average 20% of total sales, and credit sales make up the rest. Three-fourths of credit sales are collected in the month of the sale, with the balance collected the following month.
- The company pays rent and property taxes of $4,500 each month. Commissions and other selling expenses average 30% of sales. Agua Cool pays one—half of commissions and other selling expenses in the month incurred, with the balance paid the following month.
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