Question

PROBLEM 2: CASH BUDGET PROBLEM (20 pts)

Milton Company is a chocolate wholesaler. The company presents the following information to the date of April 30

: Cash ………………………………………… .. $ 9,000

Accounts receivable …………………… .. 54,000

Inventory …………………………………… .. 30,000

Building and equipment, net …… .. 207,000

Accounts payable ……………………… $ 63,000

Note payable ………………………… .. 14,500

Stock capital …………………………… .. 180,000

Retained earnings …………………… 42,500

The company is in the process of preparing the budget for the month of May. Below are a series of items to prepare the cash budget:

1 Sales budgeted for May are $ 200,000. Of that item, 30% is charged at the moment and the remaining are credit sales. 50% of credit sales are charged in the month of sale and the remaining is charged in the following month. All accounts receivable as of April 30 are collected in May. 2 Inventory purchases are expected to be $ 120,000 in the month of May. All are on credit. 40% of purchases are paid in the month of purchase, the remainder in the following month. All accounts payable as of April 30 are paid in May. 3 The inventory balance as of May 31 budgeted is $ 40,000 4 Sales and administration expenses for May budgeted are $ 72,000. These expenses are paid in Cash. Depreciation is budgeted at a rate of $ 2,000 per month. 5 The Note Payable on April 30 will be paid in May, with an additional $ 100 of interest. 6 I bought a new device that cost $ 6,000 to be paid in cash in May. 7 In May, he takes a loan for $ 20,000 to the Bank by signing a note that expires in one year. Requirements: Prepare a Cash Budget for the month of May. Support this budget with the Schedule of Cash Collections from sales “and Shedule of Cash Disbursements” for merchandise purchases.

Answer 1

Schedule of cash Collection fron sales: Fo the Month of May Particulars Cash collection at the momet of Sale: C30% is chavged at the monet of Sale, s0 $200000 30% Goo00 70000 cash collection of Credit sales: (50% 0f Credit Sales are Collected in the Same month so, $2000O0 0 (s 30% S alneady collected) $t40000 507 (50% collected in the same month) $10000 Accoun ts neCeiva ble as on APril 30 (9ll are collected in May) Total 54000 r84 000 Sche dule of Cash Disbussemeot for Merchandise Punchases Particulans cash Payment on Budgeted Invertory Rurchases: C4OY Of invenbory Runchases are Paid in the Sane Mouct 20000 40%) Payments of Accounts Payable as on Apil 30 (AlL accounts Payable as on 30th APril are Paid in May) Totel 48000 6 300 0 11000

Cash Budget (for the month of May) Particulars May & Receipts: cash collection hom sa les CRe fer st schedule) Recepts Faronm Loan Total Receipts (A) Payments: Cash Disbunsement for merchandise Purcha ses (Reter 2nd Gchedule) Sales and Administiation Expenses Paid Note Payable Paid ($14500t $100 in terest) Equipment Purcha Sed in Cash Tatal PaymentsCB Net Receipts (A-B OPening cash Balance as on April 30th Budgeted closing balance as on May 3st 184000 200 00 204000 llo00 72 000 (46 00 6000 263600 400 9000 9400 Income statement $ Particulars Sales Revenue: (Budgeted sales) Le ss: Cost of Goods sold 2 00 000 OPening stock Inventony Purcha se Less closing stock Gross Perotit: C4200000- $11o000) Selling &Administoation enPenses Interest paid on Notes Payable DePreciation lotome From OPenations 30000 12 0000 CIlo0o0) (40000) 90000 (42000 (lo0 (2000) 15900