Question

Tiro provides you with the following information

Project 3 Cash budgets and budgeted financial statements (Chapters 4 and 5) Question 1 P. Ttro provides you with the following figures March actual sales April budgeted sales May budgeted sales June budgeted sales 42 000 39 COC 36 CCC 25 200 Sales are expected to be 70% credit and 30% cash and include GST. Invoices for credit sales are issued at the end of the month. Accounts receivable pay 70% within 30 days of invoice receiving 5% discount. Discount is recognised in the month it is allowed. 20% within 60 days. 5% within 90 days. 5% bad debts. Accounts receivable balances as at 31 March are 547400. The ageing list shows that this balance is dissected as follows: Month of sale 3 000 January February March 14 400 29 400 Purchases (GST inclusive) are paid for in the month in which they are made. Budgeted purchases are: April May 24 000 22 800 12 000 June Marketing expenses (GST inclusive) are budgeted at 10% of sales and are paid in the month they are incurred. Other expenses are expected to be Agrit MEY June 9000 7200 10 800 nnnnnn Other expenses are paid in the same month they are locurred and include GST except for depresiacon, Depreciation is included in other expenses and is $3 000 per month. Equipment will be paid for on 19 June for $30 000 (including GST). GST is accounted for by the cash method. Cash balance at 31 March is S48000. Required Prepare a casti budget for April, May and June showing monthly figures. Question 2

Answer 1

		Cash budget
					April	May	June
Beginning balance					48000	83610	109711.5
Add:
Cash sales		(30% of sales)			11700	10800	7560
Credit sales		(Note:1)			57810	45901.5	34398
Total cash available				A	117510	140311.5	151669.5
Less: Cash payments
Payment for purchase					24000	22800	12000
Marketing expense		(10% of sales)			3900	3600	2520
Other expenses (Exclude depreciation of $ 3000)					6000	4200	7800
Equipment cost payment							30000
Total payments				B	33900	30600	52320
Ending balance				A-B	83610	109711.5	99349.5
Note:1
					April	May	June
Budgeted sales					39000	36000	25200
Credit sales		(70% of sales)			27300	25200	17640
Accounts receivable				(Note:2)
Jan sales					1800
Feb sales					9600	2400
Mar sales					19110	5880	1470
April sales
70% paid in May along with 5% discount						12421.5
						(27300*70%*65%)
20% paid in June							3822
							(27300*70%*20%)
May sales
70% paid in June along with 5% discount							11466
							(25200*70%*65%)
Total					57810	45901.5	34398
Note:2
Collection of accounts receivable
Jan sales
Accounts receivable balance as on Mar 31 from Jan sales=$ 3600
70% paid in Feb along with 5% discount
20% paid in Mar
5% paid in Apr
AS on Mar 31=70%+20%=90% already paid
Only 10% left
Hence,credit sales=3600/10%=$ 36000
In April=36000*5%=$ 1800
Feb sales
Accounts receivable balance as on Mar 31 from Feb sales=$ 14400
70% paid in Mar along with 5% discount
20% paid in Apr
5% paid in May
AS on Mar 31=70% already paid
Only 30% left
Hence,credit sales=14400/30%=$ 48000
In April=48000*20%=$ 9600
In May=48000*5%=$ 2400
Mar sales
Accounts receivable balance as on Mar 31 from Mar sales=$ 29400
It represents the entire credit sales
70% paid in Apr along with 5% discount
20% paid in May
5% paid in June
In April=29400*(70%-5%)=29400*65%=$ 19110
In May=29400*20%=$ 5880
In June=29400*5%=$ 1470