1. The following information pertains to Sigma Corporation:

Month Sales Purchases

July $30,000 $10,000

August 34,000 12,000

September 38,000 14,000

October 42,000 16,000

November 48,000 18,000

December 60,000 20,000

Cash is collected from customers in the following manner:

Month of sale (2% cash discount) 30%

Month following sale 50%

Two months following sale 15%

Amount uncollectible 5%

40% of purchases are paid for in cash in the month of purchase, and the balance is paid the following month.

Required:

a. Prepare a summary of cash collections for the 4th quarter (October December). (8 points)

b. Prepare a summary of cash disbursements for purchases for the 4th quarter (October December)

2. Budgets provide a framework for evaluating performance and improve learning. Do you agree? Explain and provide examples to support you answer.

3. Some people say that budgets are great for planning but not for control. What do you think they mean? Do you agree with this sentiment? Explain.