Question

Question 3. (20 marks) Alco Inc. deals in wooden bars and had following sales revenue: Month Jan Feb Mar Apr May Jun Sales Revenue 132,000 168,000 149,000 155,000 161,000 177,000 The company charges 20% margin on the purchase price of the goods. The balance of inventory as at January 01 was $78,000 and at June 30 was $56,500. The purchases made were paid 50% in the month of purchases, 25% in the next month, and 25% in the following month
find cash budget

Answer 1

	Assumption:All sales are in cash and inventory is adjusted in beginiing and end(Since there is no information about this)
	Month	Sales Revenue	Gross Margin on Sales	Gross Margin	Cost of Goods Sold
		A	B	C=A X B	D=A-C
	Jan	132,000	16.67%	22,004	109,996
	Feb	168,000	16.67%	28,006	139,994
	Mar	149,000	16.67%	24,838	124,162
	Apr	155,000	16.67%	25,839	129,162
	May	161,000	16.67%	26,839	134,161
	Jun	177,000	16.67%	29,506	147,494
		Purchase Price	Mark up	Sales	Gross Margin on sales
		100	20	120	16.67%
	Cash Budget
		January	February	March	April	May	June
A	Sales	132,000	168,000	149,000	155,000	161,000	177,000
	Cost of Goods Sold	109,996	139,994	124,162	129,162	134,161	147,494
	Openign Stock	(78,000)
	Add:Closing Stock						56,500
	Purchases	31,996	139,994	124,162	129,162	134,161	203,994
	Payment Schedule
	January	15,998	7,999	7,999
	February		69,997	34,999	34,999
	March			62,081	31,040	31,040
	April				64,581	32,290	32,290
	May					67,080.65	33,540.33
	June						101,997.05
B	Total Payments	15,998	77,996	105,078	130,620	130,411	167,828
A-B	Net Cash	116,002	90,004	43,922	24,380	30,589	9,172
		Notes:
		Openign Stock+Purchases-Closing Stock=Cost of Goods Sold
		Purchases=Cost of Goods Sold+Closing Stock-Opening Stock