Toyota Company has budgeted sales revenues as follows: Credit sales January $260,000 February $310,000 March $4
Toyota Company has budgeted sales revenues as follows:
Credit sales
January $260,000
February $310,000
March $410,000
April $300,000
Past experience indicates that 69% of the credit sales will be collected in the month of sale, 23 % will be collected in the first month following the sale and the remaining 8% will be collected in the following month. Purchases of inventory are all on credit and 30% are paid in the month of purchase and 70% in the month following purchase. Budgeted inventory purchases are:
February $300,000
March $250,000
April $105,000
Other cash disbursements budgeted: (a)selling and administrative expenses of $45,000 each month, (b) dividends of $75,000 will be paid in March, and (c) purchase of investments in April for $25,000 cash.
The company wishes to maintain a minimum cash balance of $60,000 at the end of each month. The company borrows money from the bank at 7% interest if necessary to maintain the minimum cash balance. Borrowed money is repaid in months when there is an excess cash balance. The beginning cash balance on March 1 was $60,000. Assume that borrowed money in this case is for one month (ignore interest).
Instructions MAKE SURE TO SHOW YOUR WORK
(a) Prepare separate schedules for expected collections from customers and expected payments for purchases of inventory.
(b) Prepare a cash budget for the months of March and April.
Homework Answers
Schedule of disbursement for budgeted purchase
| February | March | April |
| 90000 | 285000 | 206500 |
| 300000*30% | (300000*70%+250000*30%) | (250000*70%+105000*30%) |
Schedule of receipt for budgeted credit sales
| January | February | March | April |
| 179400 | 273700 | 375000 |
326100 |
| 260000*69% | (260000*23%)+(310000*69%) | (260000*8%)+(310000*23%)+(410000*69%) | (310000*8%)+(410000*23%)+(300000*69%) |
Cash Budget
| Particulars | March | April |
| Credit sale receipt | 375000 | 326100 |
| purchase disbursement | (285000) | (206500) |
| Selling and administration expense | (45000) | (45000) |
| Dividend paid | (75000) | |
| Investment purchase | (25000) | |
| Net cash from transactions (A) | (30000) | 49600 |
| Opening Balance of cash (B) | 60000 | 60000 |
| minimum cash balance (C) | 60000 | 60000 |
| (Shortfall)/ Excess Z=A+B-C | (30000) | 49600 |
| Borrowing required/ repayment | 30000 | (30000)* |
| Net (Y) | 0 | 19600 |
| Closing Balance of cash (C+Y) | 60000 | 79600 |
In march there is shortfall of cash by $30000 which had to be borrowed at 7% interest.
* In April there is excess of cash from minimum balance hence the loan has been repaid.
Interest has been ignored as asked in the question.
Add Answer to:
Toyota Company has budgeted sales revenues as
follows:
Credit sales
January $260,000
February $310,000
March
$4
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