Question

Section time: 1) MyCo Inc. had the following sales estimates for the 1st half of the year - they want you to prepare a Cash budget including the schedule of cash receipts and cash payments for the 2nd Qtr (3 months of April, May & June). Half of MyCo's sales are on account and the collection schedule is 20% in the month of sale, 50 % the following month and 30% the month after that. They do not expect any amounts to be uncollectable. The beginning balance of cash on April 1st is $10,000. Inventory Purchases are paid for as follows: 50% the month of purchase and 50% the following month all other expenses must be paid for in the month they are incurred. They can only borrow in increments of $5,000 and must have a minimum cash balance at all times of $10,000. Be sure to show all your work. February April $200,000 May $200,000 June March $200,000 Sales $100,000 $150,000 $150,000 $200,000 INV Purchases $70,000 $100,000 $100,000 $35,000 $35,000 $35,000 $35,000 Payroll Depreciation $35,000 $10,000 $10,000 $10,000 $10,000 $10,000 $25,000 $25,000 $25,000 $25,000 $25,000 Rent torecof (5a APK 40009 CAS gooK 4afe

Answer 1

Solution

(a)

MyCo Inc.
Statement showing schedule of Cash Receipts
for the quarter ending on June 30th
Particulars	April	May	June	Quarter
	($)	($)	($)	($)
Cash Sales	1,00,000.00	1,00,000.00	1,00,000.00	3,00,000.00
Recovery from Credit Sales
(Refer workings)	72,500.00	92,500.00	1,00,000.00	2,65,000.00
Total Cash Receipts	1,72,500.00	1,92,500.00	2,00,000.00	5,65,000.00

Workings:

	Total Sales	Cash Sales (50%)	Credit Sales (50%)	Recovery of Credit Sales
	($)	($)	($)	February		March		April		May		June
				%	$	%	$	%	$	%	$	%	$
February	1,00,000.00	50,000.00	50,000.00	20%	10,000.00	50%	25,000.00	30%	15,000.00
March	1,50,000.00	75,000.00	75,000.00			20%	15,000.00	50%	37,500.00	30%	22,500.00
April	2,00,000.00	1,00,000.00	1,00,000.00					20%	20,000.00	50%	50,000.00	30%	30,000.00
May	2,00,000.00	1,00,000.00	1,00,000.00							20%	20,000.00	50%	50,000.00
June	2,00,000.00	1,00,000.00	1,00,000.00									20%	20,000.00
					10,000.00		40,000.00		72,500.00		92,500.00		1,00,000.00

(b)

MyCo Inc.
Statement showing schedule of Cash Payments
for the quarter ending on June 30th
Particulars	April	May	June	Quarter
	($)	($)	($)	($)
Cash Purchases	50,000.00	75,000.00	1,00,000.00	2,25,000.00
Payment for Credit Purchases
(Refer workings)	50,000.00	50,000.00	75,000.00	1,75,000.00
Payroll Expenses	35,000.00	35,000.00	35,000.00	1,05,000.00
Rental Expenses	25,000.00	25,000.00	25,000.00	75,000.00
Total Cash Payments	1,60,000.00	1,85,000.00	2,35,000.00	5,80,000.00

Workings:

	Total Purchases	Cash Purchases (50%)	Credit Purchases (50%)	Recovery of Credit Purchases
	($)	($)	($)	March		April		May		June
				%	$	%	$	%	$	%	$
February	70,000.00	35,000.00	35,000.00	100%	35,000.00
March	1,00,000.00	50,000.00	50,000.00			100%	50,000.00
April	1,00,000.00	50,000.00	50,000.00					100%	50,000.00
May	1,50,000.00	75,000.00	75,000.00							100%	75,000.00
					35,000.00		50,000.00		50,000.00		75,000.00

(c)

MyCo Inc.
Cash Budget for the quarter ending on June 30th
Particulars	April	May	June	Quarter
	($)	($)	($)	($)
Opening Balance	10,000.00	22,500.00	30,000.00	62,500.00
Add: Total Cash Receipts
(Refer (a) above)	1,72,500.00	1,92,500.00	2,00,000.00	5,65,000.00
	1,82,500.00	2,15,000.00	2,30,000.00	6,27,500.00
Less: Total Cash Payments
(Refer (b) above)	-1,60,000.00	-1,85,000.00	-2,35,000.00	-5,80,000.00
Net Balance	22,500.00	30,000.00	-5,000.00	47,500.00
Add: Borrowings
Borrowings	-	-	15,000.00	15,000.00
Interest	-	-	-	-
Repayment	-	-	-	-
Closing Balance	22,500.00	30,000.00	10,000.00	62,500.00