The accountant of Turn Key (Pty) Ltd instructs you to prepare a monthly cash budget for August. You are presented with the following budget information for July and August 2020. July August Sales. R590 000. R650 000 Manufacturing costs. R300 000. R340 000 Selling and administrative expenses R150 000. R170 000 Capital expenditures R120 000 (August) 1. The company expects to sell 10% of its merchandise for cash. 2. Credit sales will be collected as follows: 60% are expected to be collected in the month following the month of sale, and the remainder, in the second month following the month of sale. 3. On August 1 Cash balance was R55 000. 4. Accounts receivable as a result June credit sales was R442 000. 5. It is expected that R1 500 in dividends will be received in August. 6. All selling and administrative expenses are paid in cash in the period in which they are incurred. 7. Estimated monthly manufacturing costs include depreciation of R30 000. 8. An estimated income tax payment of R42 000 will be made in September. 9. Turn Key’s (Pty) Ltd will pay a dividend of R15 000 in October. Required: Prepare a cash budget for the month August 2020 to be able to answer the multiple-choice questions that follow

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter8: Budgeting

Section: Chapter Questions

Problem 5PB: Cash budget The controller of Mercury Shoes Inc. instructs you to prepare a monthly cash budget for...

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The accountant of Turn Key (Pty) Ltd instructs you to prepare a monthly cash budget for August. You are presented with the following budget information for July and August 2020. July August Sales. R590 000. R650 000 Manufacturing costs. R300 000. R340 000 Selling and administrative expenses R150 000. R170 000 Capital expenditures R120 000 (August) 1. The company expects to sell 10% of its merchandise for cash. 2. Credit sales will be collected as follows: 60% are expected to be collected in the month following the month of sale, and the remainder, in the second month following the month of sale. 3. On August 1 Cash balance was R55 000. 4. Accounts receivable as a result June credit sales was R442 000. 5. It is expected that R1 500 in dividends will be received in August. 6. All selling and administrative expenses are paid in cash in the period in which they are incurred. 7. Estimated monthly manufacturing costs include depreciation of R30 000. 8. An estimated income tax payment of R42 000 will be made in September. 9. Turn Key’s (Pty) Ltd will pay a dividend of R15 000 in October. Required: Prepare a cash budget for the month August 2020 to be able to answer the multiple-choice questions that follow.

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