Question

Duiy cUpaily lls plathed the tollowing sales for the next three months: January Budgeted Sales $40,000 February $50,000 March $70,000 Sales are made 20% for cash and 80% on account. From experience, the company has learned that a month sales on account are collected according to the following pattern: Month of sale First month following sale second month following sale Uncollectible 60% 30% 8% 2%

Answer 1

a)

Schedule of Budgeted Cash Receipts
	March
Cash sales (20% x $70000)	14000
Collection of credit sales for:
March (80% x $70000 x 60%)	33600
February (80% x $50000 x 30%)	12000
January (80% x $40000 x 8%)	2560
Total budgeted cash receipts $	62160

b)

Cash Budget
For the Month of March
Beginning cash balance $	6000
Add receipts:
Collections from customers	62160
Total cash available	68160
Less cash disbursements:
Inventory purchases	28000
Operating expenses	40000
Dividends	4000
Total cash disbursements	72000
Excess (deficiency) of cash available over disbursements	-3840
Financing:
Borrowings	8840
Repayments	0
Interest	0
Total financing	8840
Ending cash balance $	5000