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Q1. Cash Budget Exercise: Below are some important figures from the budget of the Sundays Limited for the next three months. Apr Mar $160,000 68,000 $140,000 64,000 May $192,000 80,000 Credit sales Credit purchases Cash disbursements: Wages, taxes, and expenses Interest Equipment purchases 7,000 8,000 3,000 50,000 3,000 8,400 3,000 4,000 The company predicts that 10% of its sales will never be collected. 50% of its sales will be collected in the month of the sale: the rest of its sales will be collected in the following month. Purchases on trade accounts will be paid in the month following the purchase. Sundays also plans to pay $10.000 dividends to its shareholders in May. In addition, the company is scheduled to make a principal repayment of $320,000 on its short-term loan at the end of April. In February, the credit sales were $180,000. Use above information to complete the following cash budget. Mar Apr Beginning cash balance $200,000 Cash receipts Cash collections from credit sales Bank loan Total cash available Cash disbursements: Pay credit purchases 65,000 Wages, taxes, and expenses Equipment purchases Interest Principal repayments Dividends Total cash disbursed Ending cash balance

Answer 1

Solution 1:

Cash Budget is as prepared below:

Sundays Limited
Cash Budget
	Month
Particulars	Mar	April	May
Beginning cash balance	$200,000	$546,000	$282,000
Cash receipts
Cash collections from credit sales	$152,000	$134,000	$152,000
Bank loan	$320,000
Total cash available	$672,000	$680,000	$434,000
Cash disbursements:
Pay credit purchases	$65,000	$68,000	$64,000
Wages, taxes and expenses	$8,000	$7,000	$8,400
Equipment purchases	$50,000		$4,000
Interest	$3,000	$3,000	$3,000
Principal repayments		$320,000
Dividends			$10,000
Total cash disbursed	$126,000	$398,000	$89,400
Ending cash balance	$546,000	$282,000	$344,600
	Month
Particulars	Mar	April	May
Cash collections from credit sales
in same month	$80,000	$70,000	$96,000
following month	$72,000	$64,000	$56,000
	$152,000	$134,000	$152,000