ABC Ltd is a wholesaler. The management has been extremely worried about the entity’s cash position over the last few years. In January, they sought your advice and asked you to prepare a cash budget for the forthcoming month of May. The business has provided the following information to assist in this task.
January |
February |
March |
April |
May |
June |
|
Total sales |
$ 152,500 |
$ 171,250 |
$ 177,500 |
$ 185,000 |
$ 167,500 |
$ 157,500 |
Required:
Solution:
1. Cash receipts from credit customers for the month of April, May and June
Month |
Credit Sales ($) |
April |
May |
June |
January |
$152,500 x 80% = $122,000 |
0 |
0 |
0 |
February |
$171,250 x 80% = $137,000 |
$137,000 x 20% = $27,400 |
0 |
0 |
March |
$177,500 x 80% = $142,000 |
$142,000 x 30% = $42,600 |
$142,000 x 20% = $28,400 |
0 |
April |
$185,000 x 80% = $148,000 |
$148,000 x 50% = $74,000 |
$148,000 x 30% = $44,400 |
$148,000 x 20% = $29,600 |
May |
$167,500 x 80% = $134,000 |
0 |
$134,000 x 50% = $67,000 |
$134,000 x 30% = $40,200 |
June |
$157,500 x 80% = $126,000 |
0 |
0 |
$126,000 x 50% = $63,000 |
Total Collection |
$144,000 |
$139,800 |
$132,800 |
.
2. Cash Budget of ABC Ltd. for the month of May
$ |
$ |
|
Anticipated Receipts: |
||
Receipts from credit customers |
139,800 |
|
Cash Sales (167,500 x 20%) |
33,500 |
|
Cash receipt from sales of obsolete inventory |
9,500 |
|
Sales of old equipment |
5,000 |
|
A. Total Cash Receipts |
187,800 |
|
Anticipated Payments: |
||
Payment for inventory purchased in April |
80,000 |
|
Payment for inventory-handling equipment |
52,600 |
|
Rent |
5,500 |
|
Wages |
20,500 |
|
Advertising |
6,300 |
|
B. Total Cash Payments |
164,900 |
|
Excess (Deficit) receipts over payments (A-B) |
22,900 |
|
Cash Balance at the beginning of month |
16,000 |
|
Cash Balance at the end of month |
38,900 |
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