Question

Part 2

Consider the budgeted income statement for Happy Turtles for the month ended 30 June 2017 below:-

			$	$
Sales                                               Less:   Cost of Goods Sold				290,000
Inventory, 31 May 2017			50,000
Purchases			192,000
Available for sale			242,000
Inventory, 30 June 2017			(40,000)
				202,000
Gross profit				88,000

Less:   Operating expenses

                   Wages                                                                                        36,000

                   Utilities                                                                          5,000

                   Advertising                                                                                10,000

                   Depreciation                                                                                1,000

                   Office expenses                                                            4,000

                   Insurance and property taxes                                                    3,000                (59,000)

       Operating profit                                                                                                                                 29,000

                                                                                                                                       =====

Additional information:

• The cash balance on 31 May 2017 $15,000.
• Sales proceeds are collected as follows: 80% the month of sale; 10% the second month; and 10% the third month; explain what % will be use and why the other % will not be use.
• Accounts receivable are $ 44,000 on 31 May 2017 consisting of $ 20,000 from April 2017 sales and $24,000 from May 2017 sales, show the calculation and write process of getting the answer.
• Accounts payable on 31 May 2017 are $ 145,000.
• Happy Turtles pay 25% of purchases during the month of purchase and the remainder during the following month, what is the month of purchase, specify your answers.
• All operating expenses requiring cash are paid during the month of recognition, except that insurance and property taxes are paid annually in December for the forthcoming year.
• do we put amortization on the cash budget, write the reason.

Required:

Prepare a cash budget for June 2017. Confine your analysis to the given data. Ignore income taxes.

Answer 1