Question
A company sells cars. The data following data are taken from a statement of financial position at March 31, 2019 Cash $6000 Accounts Receivable $18000
A company sells cars. The data following data are taken from a statement of financial position at March 31, 2019
Cash $6000
Accounts Receivable $18000
Inventories $34000
Accounts payable $19750
Additional info:
1) Actual and expected sales are:
March (Actual) $40000
April $50000
May $62000
June $80000
2) 30% of sales are on credit, the remaining are in cash. All credit sales are collected in the following month.
3) The ending inventory should be 70% of the following month's sales cost of goods sold.
4) Gross margin is expected to be 20% of sales
5) Of each month's purchases, 40% are paid in cash, and the remaining is paid for in the month following purchase,
6) Monthly operating expenses are: salaries in commissions, 10% of sales; rent, $2000 and other expenses, excluding depreciation equipment, equal to 8% of sales. All paid in the month where they are incurred. Monthly depreciation equipment is $800.
7) Equipment will be purchased in April $1500 in cash
8) The company has a policy that the ending cash balance in each month must be at least $3500. The company can borrow at the beginning of each month. All repayments are made at the end of the month. All borrowings and repayments are made in increments of $100. The interest rate on borrowings is 5% per year with interest being paid in the month of borrowings.
Question: Prepare the following budgets
1. Cash disbursements for purchase budget
April | May | |
Cash purchases | ||
Credit purchases | ||
Total |
2.Operating expense budget
April | May | |
Salaries | ||
Rent | ||
Other | ||
Total before depreciation | ||
Depreciation | ||
Total expenses |
Could anyone give an explanation on how to do these budgets step by step?
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