17 Cash receipts, disbursements and summary budgets LO5 Veronica's Cakes cooks and distributes cakes for every imaginable occasion. Veronica started the company in her house three years ago and has been surprised at her success. She is considering expanding her business and needs to prepare cash budgeting information to present to Westpac Bank to secure a loan. Veronica is not an accountant, so she has asked you to help her to prepare the necessary reports. Veronica's Cakes began the month with a bank balance of $20000. The budgeted sales for March to June are as follows: The cost of sales is expected to increase to 60 per cent of sales in 2017. Inventory is purchased in the quarter of expected sale. Eighty per cent of inventory purchases are paid for in the quarter of purchase and 20 per cent are paid for in the quarter following purchase. The accounts payable balance as of 31 December 2016, relates to inventory purchases made in the fourth quarter of 2016. Selling, general and administrative costs are expected to increase to $225000 per quarter in 2017. Of this quarterly amount, $10000 is depreciation expense of property, plant and equipment. The inventory balance at the end of 2017 is $400000. The company's tax rate is expected to be 40 per cent. REQUIRED March April May June Cash sales $28000 $33 000 $31000 $35000 a Prepare a budgeted income statement for 2017. Sales on account Total sales 58000 $86000 60000 80000 100000 $93 000 $111000 $135000 b Prepare a budgeted balance sheet as of 31 December 2017. Veronica has found that she generally collects payment for credit sales over a two-month period. Typically, 70 per cent is collected in the month of sale and the remainder is collected in the next month. Her policy is to purchase inventory each month equivalent to 60 per cent of that month's budgeted sales. She thinks this provides her sufficient inventory levels to manage unanticipated changes in demand. Veronica's Cakes pays for inventory purchases in the month following purchase. Selling and administrative expenses are budgeted to be 40 per cent of each month's sales. One-half of the selling and administrative expenses is accounted for by depreciation on Veronica's manufacturing equipment. The company purchased additional manufacturing equipment in April at a cost of $28000. Veronica does not receive a salary, but she does pay herself dividends as company performance allows. The first quarter of the year was very profitable, so Veronica paid herself a dividend of $17 800 in April. Veronica wants to maintain a minimum cash balance of $10000 and has established a line of credit