Question

Total You are provided with the following Sales Budget, archases Budget and selling and administrative expenses budget for Salya World Co. for the last quarter of the year 2019 chles Badet Reglement I Cash receipt from customer's Budget Oct Nov Dec Oet Collections FreeOct Sales Fresep Sales TlOct collection New Collection From Nov. Sales From Oct Sales Total Now Cash sales Credit sales I oct. 36,000 12.000 48.000 Nov. 45,000 15.000 60.000 Der 54.000 18,000 72.000 Tecal ] 135.000 45,000 180 000 In Burchase Budo The Collections Free Dee Sales Free Nov. Sales Total Dec. collectie Total cash receipt Cash Purchases Credit Purchases Total Purchases I Oct 12,000 4000 16,000 Nov 18.000 7,000 25,000 Dec 25.000 10,000 35.000 Total ] 55.000 21.000 76.000 Requirement purchase payment Budget ( Sales & Administrative Expenses Budget Salaries Oct 8,000 4,800 Nov 9,000 3,600 Dec. 8,600 5,400 Total 25,600 13,800 Commissions 500 2,200 120 400 100 16,120 500 2.750 120 400 100 16,470 500 2.500 120 400 100 17,620 1.500 7.450 350 1.200 300 50,210 Oct. purch. Payments For Oct. Purch For Sep Purch TotalOct. Pure Pay Nor. purch. Payments For No. Purch Fee Oct. Purch Total Now. Purch. Pay Dec. purch. Payments For Dec. Purh For Nov. Purch Total De Purch Pay. Total Purchase Payments Depreciation Total Requirement Cash Badget Requirements: Assuming Salhiya world is planning to purchase new furniture for $10,000 cash during Oct. 2019. All cash expenses are paid when incurred except insurance expenses which is an expiration of prepaid. Prepare the following budgets for the last quarter of the year 2019: Beginning cash balance Cach Tips Cash available Cach 1-Collections from customers budget Assume all credit sales will be collected during the following month of sale. (Accounts Receivable at Sep 30, 2019 expected to be $10,000) For Purchases For S & Am F I For Additional Assets Total cash payments Cash balance before 2. Payments for purchases budget Assume all credit purchases will be paid during the following month of purchases (Accounts Payable at dSep 30 2019 is expected to be 55,000) 3- Cash budget assume the company wishes to maintain a minimum cash balance of $ 75,000 at the end of each month. To maintain the minimum cash balance, the company can borrow from the bank in $1,000 increments at %10 interest and the company should payback borrowed money when there an excess cash balance. (Cash balance at dec 31 2019 is expected to be $60,000) Minimum cash condition Cash Excess (Short ) . Finance Borrowint Principle payment Interest Payment Financing Effect Ending Cash Balance

Answer 1

1.

Here , terms of receipts of the payment for credit sales is current sales amount to be received in next month . Hence Sep credit sales payment will be received in Oct , Accordingly Oct in Nov and Nov in Dec . So we will arrange as cash sales collection in same month and credit sales collection in next month .

Hence cash receipt budget would be like

Cash receipt from cusotmer's Budget
	Oct	Nov	Dec	Total
Oct's Collection
From Oct. Sales	$ 36,000			$ 36,000
From Sep. Sales	$ 10,000			$ 10,000
Total Oct's Collections	$ 46,000			$ 46,000
Nov's Collection				$ 000
From Nov. Sales		$ 45,000		$ 45,000
From Oct. Sales		$ 12,000		$ 12,000
Total Nov's Collections		$ 57,000		$ 57,000
Dec's Collection				$ 000
From Dec. Sales			$ 54,000	$ 54,000
From Nov. Sales			$ 15,000	$ 15,000
Total Dec's Collections			$ 69,000	$ 69,000
Total Cash receipts	$ 46,000	$ 57,000	$ 69,000	$ 1,72,000

2.

Here , terms of the payment for credit purchase is current month purchase amount to be paid in next month . Hence Sep credit purchase payment will be paid in Oct , Accordingly Oct in Nov and Nov in Dec . So we will arrange as cash purchase payment in same month and credit purchase payment in next month .

Hence cash receipt budget would be like

Purchase payment budget
	Oct	Nov	Dec	Total
Oct's Purch. payment
For Oct.Purchase	$ 12,000			$ 12,000
For Sep.Purchase	$ 5,000			$ 5,000
Total Oct's Purch. payments	$ 17,000			$ 17,000
Nov's Purch. payment
For Nov.Purchase		$ 18,000		$ 18,000
For Oct.Purchase		$ 4,000		$ 4,000
Total Nov's Purch. payments		$ 22,000		$ 22,000
Dec's Purch. payment
For Dec.Purchase			$ 25,000	$ 25,000
For Nov.Purchase			$ 7,000	$ 7,000
Total Dec's Purch. payments			$ 32,000	$ 32,000
Total Purchase payments	$ 17,000	$ 22,000	$ 32,000	$ 71,000

3.

Here in below cash budget cash receipts have been take from cash receipts budget and purchase payment taken from purchase payment budget. New Asset purchase in cash Rs10000 in Oct.   We assume excess cash is use to pay in earlier loan . Depreciation will not be consider in cash budget as there is no impact of cash in depreciation. We assume Sep cash balance is minimum balance Rs.75000/- and Dec as per question Rs.60000/-

Cash Budget
	Oct.	Nov.	Dec.	Total
Beginning cash balance	$ 75,000	$ 75,000	$ 75,000	$ 2,25,000
Cash Receipts	$ 46,000	$ 57,000	$ 69,000	$ 1,72,000
Cash Avaiable	$ 1,21,000	$ 1,32,000	$ 1,44,000	$ 3,97,000
Cash Payment
For Purchase	$ 17,000	$ 22,000	$ 32,000	$ 71,000
For Sales and adm Exp	$ 16,020	$ 16,370	$ 1,520	$ 33,910
For Additional Assets	$ 10,000			$ 10,000
Total Cash Payment	$ 43,020	$ 38,370	$ 33,520	$ 1,14,910
Cash Balance before financing	$ 77,980	$ 93,630	$ 1,10,480	$ 2,82,090
Minimum Cash Balance	75000	75000	60000	$ 2,10,000
Cash Excess (Shortage)	$ 2,980	$ 18,630	$ 50,480	$ 72,090
Financing
Borrowing
Principal Payment	$ 2,980	$ 18,360	$ 50,480	$ 71,820
Interest payment
Financing effect	$ 2,980	$ 18,360	$ 50,480	$ 71,820
Ending Cash Balance	75000	75000	60000	$ 2,10,000