ABX Ltd manufactures a single product. You are the management accountant responsible for preparing the quarterly budgets for the next quarter from January to March 2022. Your colleague, the financial accountant, has provided you the following extracted data from the balance sheet as at 31 December 2021:

Assets Liabilities

Account receivable $250 000 Bank overdraft $90 000

Plant and machinery $800 000 (cost) Dividend payable $10 000

Long-term loan 15% $400 000

The following transactions are expected during the next three months:

Sales Purchases Expenses

January $1 500 000 $1 000 000 $200 000

February $2 000 000 $1 500 000 $250 000

March $3 000 000 $2 800 000 $300 000

All sales are on credit and the cash collections have the following pattern:

During the month of sale: 80% (early payment discount of 4% is given)

In the subsequent month: 20% (no discount)

Payments for purchase are made in the month of purchase enjoying a 10% early payment discount.

The dividend payable will be paid in January.

Loan interest for the three months will be paid in March.

Q1. Make Cash Budget for each of the three months from January to March 2022.

Q2. Make Budgeted Income Statement for the period from January to March 2022.

Hi Tutors,

I have difficulty with this question, especially the percentage, I do not know how to calculate them. Can you please assist me with this question? Thank you.