Question

Sales are 65% cash and 35% credit. Credit sales are collected 10% in the month of sale and the remainder in the month after sale. Actual sales in December were а. $57,000. Schedules of budgeted sales for the two months of the upcoming year are as follows: Budgeted Sales Revenue $58,000 January February $72,000 Actual purchases of direct materials in December were $25,000. The company's purchases of direct materials in January are budgeted to be $22,500 and $27,000 in February. All purchases are paid 25% in the month of purchase and 75% the following month. b. Salaries and sales commissions are also paid half in the month earned and half the next month. Actual salaries were $8,500 in December. Budgeted salaries in January are $9,500 and February budgeted salaries are $11,000. Sales commissions each month are 15% of that month's sales. С. Rent expense is $3,000 per month Depreciation is $2,400 per month Estimated income tax payments are made at the end of January. The estimated tax payment is projected to be $13,000 The cash balance at the end of the prior year was $18,000 d. е. f g.

Answer 1

1.a) Schedule of Budgeted Cash Collections January February Total Cash Sales $ 37,700 $ 46,800 $ 84,500 Credit Sales: December Sales $ 17,955 $ - $ 17,955 January Sales $ 2,030 $ 18,270 $ 20,300 February Sales $ 2,520 $ 2,520 Total Credit Sales $ 19,985 $ 20,790 $ 40,775 Total Cash Collections $ 57,685 $ 67,590 $1,25,275

1.b) Schedule of Budgeted Cash Payments for Purchases January February Total December Purchases $ 18,750 $ - $ 18,750 January Purchases $ 5,625 $ 16,875 $ 22,500 February Purchases $ - $ 6,750 $ 6,750 Total Purchases Paid $ 24,375 $ 23,625 $ 48,000

1.c) Schedule of Budgeted Cash Payments for Operating Expenses January February Total Salaries December $ 4,250 $ - $ 4,250 January $ 4,750 $4,750 $ 9,500 February $ . $ 5,500 $ 5,500 Total Salaries $ 9,000 $ 10,250 $ 19,250 Sales Commissions December $ 4,275 $ - $ 4,275 January $ 4,350 $ 4,350 $ 8,700 February $ - $ 5,400 $ 5,400 Total Sales Commissions $ 8,625 $ 9,750 $ 18,375 Rent Expense $3,000 $3,000 $ 6,000 Total Operating Expenses Paid $ 20,625 $ 23,000 $ 43,625

Roan's Restaurant Supply Cash Collections Budget For the Months Ended January 31 and February 28 January February Total Beginning Cash Balance $ 18,000 $ 17,685 $ 18,000 Add: Collections from Customers $ 57,685 $ 67,590 $1,25,275 Total Cash Available $ 75,685 $ 85,275 $1,43,275 Less: Cash Disbursements Purchases $ 24,375 $ 23,625 $ 48,000 Salaries $ 9,000 $10,250 $ 19,250 Sales Commission $ 8,625 $ 9,750 $ 18,375 Rent $ 3,000 $3,000 $ 6,000 Income Tax $ 13,000 $ - $ 13,000 Total Cash Disbursements $ 58,000 $ 46,625 $1,04,625 Excess Cash Available/ Ending Cash Balance $ 17,685 $ 38,650 $ 38,650 Budgeted Cash Balance on February 28 is $38,650

Workings: Cash collections from Credit Sales during January = December Credit Sales x 90% + January Credit Sales x 10% = (57,000 x 35%) x 90% + (58,000 x 35%) x 10% = 17,955 +2,030 = $ 19,985 Cash collections from Credit Sales during February = January Credit Sales x 90% + February Credit Sales x 10% = (58,000 x 35%) x 90% + (72,000 x 35%) x 10% = 18,270 + 2,520 = $ 20,790 Cash Payments for Puchases during January = December Purchases x 75% + January Purchases x 25% = 25,000 x 75% + 22,500 x 25% = 18,750 + 5,625 = $ 24,375 Cash Payments for Puchases during February = January Purchases x 75% + February Purchases x 25% = 22,500 x 75% + 27,000 x 25% = 16,875 +6,750 = $ 23,625

Salaries Paid for January = Salaries for December x 50% + Salaries for Janaury x 50% = 8,500 x 50% +9,500 x 50% = 4,250 +4,750 = $ 9,000 Salaries Paid for February = Salaries for February x 50% + Salaries for Janaury x 50% = 11,000 x 50% +9,500 x 50% = 5,500 +4,750 = $ 10,250 Sales Commission Paid for January = Sales Commission for December x 50% + Sales Commission for Janaury x 50% = (57,000 x 15%) x 50% + (58,000 x 15%) x 50% = 4,275 +4,350 = $ 8,625 Sales Commission Paid for February = Sales Commission for Febraury x 50% + Sales Commission for Janaury x 50% = (72,000 x 15%) x 50% + (58,000 x 15%) x 50% = 5,400 +4,350 = $ 9,750