Question

Jolly Green Giant Industries needs a cash budget for the month of July, 2020. The company’s controller has provided you
with the following information and assumptions:
1.The July 1, 2020 cash balance is expected to be $11,000.
2. All sales are on account. Credit sales are collected over a three-month period—50 percent in the month of sale, 35
percent in the month following sale, and 15 percent in the second month following sale. Actual sales for May and June
were $100,000 and $90,000, respectively. July’s sales are budgeted at $110,000.
3. Marketable securities are expected to be sold for $25,000 during the month of Julyl.
4. The controller estimates that direct materials totalling $44,000 will be purchased during July. Sixty percent of a
month’s raw materials purchases are paid in the month of purchase with the remaining 40 percent paid in the following
month. Accounts payable for June purchases total $9,000, which will be paid in July.
5. During July, direct labour costs are estimated to be $19,000.
6. Manufacturing overhead is estimated to be 40 percent of direct labour costs, Further, the controller estimates that
approximately 10 percent of the manufacturing overhead is depreciation on the factory building and equipment.
7. Selling and administrative expenses are budgeted at $22,000 for July. Of this amount, $7,000 is for depreciation.
8. During July, Jolly Green Giant Industries plans to buy a new delivery truck costing $25,000. The company will pay cash
for the truck.
9. Jolly Green Giant Industries $35,000 in income tax, which must be paid in July.
10. Jolly Green Giant Industries must maintain a minimum cash balance of $10,000. To bolster the cash position as
needed, an open line of credit is available from the bank.

Instructions
Prepare the following:
a) A schedule of cash collections for July.
b) A schedule of cash payments for raw materials for July.
c) A cash budget for the month of April. Indicate in the financing section any borrowing that will be necessary
during the month.

Answer 1

Solution

(a) Schedule of Cash Collections:

Jolly Green Giant Industries
Schedule of Cash Collections
		May		June		July
May	$ 1,00,000.00	50%	$ 50,000.00	35%	$ 35,000.00	15%	$     15,000.00
June	$     90,000.00			50%	$ 45,000.00	35%	$     31,500.00
July	$ 1,10,000.00					50%	$     55,000.00
Total Collections during the month of July							$ 1,01,500.00

(b) Schedule of Cash Payments for Raw Materials in June:

Jolly Green Giant Industries
Schedule of Cash Payments in June
Amount Payable for Purchases made in June	$   9,000.00
Amount Payable for Purchases made in July
(44000 x 60%)	$ 26,400.00
Total Payments for procuring raw materials in July	$ 35,400.00

(c) Cash Budget for the month of July:
(This is to be noted that in the beginning of the problem, it was required to work out the budget for the month of July, and all the information were given according to that requirement. But at the end it was asked to work out the budget for the month of April. Hence considering the same as a typographical error, the budget for the month of July 202 has been worked out below.)

Jolly Green Giant Industries
Cash Budget for the month of July 2020
Particulars	Amount ($)
Opening Balance	11,000.00
Receipts
1. Cash Collections from Debtors	1,01,500.00
2. Sale of Marketable Securities	25,000.00
Total	1,37,500.00
Payments
1. Cost of Materials	35,400.00
2. Direct Labor Costs	19,000.00
3. Manufacturing Overhead
(19000 x 40% x 90%)	6,840.00
4. Selling and Distribution Expenses
(22000 - 7000)	15,000.00
5. Purchases of Delivery Truck	25,000.00
6. Income Taxes paid	35,000.00
Balance	1,260.00
Financing
Loan from Bank (Balancing Figure)
(10000 - 1260)	8,740.00
Closing Balance	10,000.00