tedSales BudgetedPurchases May $800,000 June $900,000 $600,000 July $750,000 $550,000 August $650,000 $450,000 September $800,000 $500,000 i) All sales are on credit and an analysis of the records shows that debtors settle according to the following pattern, in accordance with the credit terms 5/30, n90: 50% in the month of sale 30% in the month following sale 20% the following mo
|
BudgetedSales |
BudgetedPurchases |
|
|
May |
$800,000 |
|
|
June |
$900,000 |
$600,000 |
|
July |
$750,000 |
$550,000 |
|
August |
$650,000 |
$450,000 |
|
September |
$800,000 |
$500,000 |
i) All sales are on credit and an analysis of the records shows that debtors settle according to the following pattern, in accordance with the credit terms 5/30, n90:
50% in the month of sale
30% in the month following sale 20% the following month
ii) All purchases are on credit and past experience shows that 80% are settled in the month of purchase in order to take advantage of a 10% prompt settlement discount. The balance will be disbursed in the month after purchase.
The credit terms of the suppliers - 10/30, n60.
iii) Wages and salaries are expected to be $1,800,000 per annum and are paid monthly.
iv) Fixed operating expenses, which accrue evenly throughout the year, are estimated to be $2,400,000 per annum, (including
v)
vi) The company is expected to receive settlement on an insurance claim of $50,000 in September.
vii) Interest on investment in other companies of $25,000 is expected in July 2004.
viii) A short-term investment in JMMB Ltd. of $80,000 will be liquidated in September 2004.
ix) The business has made arrangements with their bankers for a loan of $250,000. The loan will be disbursed in two tranches:
July 1, 2004 $150,000
November 1, 2004 $100,000
Required:
(a) Prepare a schedule of expected cash collections for sales for each of the months July to September.
(b) Prepare a schedule of expected cash disbursements for purchases for the quarter to September 30, 2004.
Prepare a
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