At the end of June 2018, AMH Ltd. had a bank overdraft of 1,000,000. Cash budgeting is critical to the companys financial information needs. The following information was extracted from the companys records:

1. The table below provides information on budgeted sales for the periods indicated:

Budgeted Sales

2018 $

January $ 2,400,000

February $1,500,000

March $2,800,000

April $1,900,000

May $3,000,000

June $2,500,000

July $2,700,000

August $2,000,000

September $3,400,000

October $1,200,000

November $1,500,000

December $3,600,000

The companys records indicated that 50% of the companys sales were for cash; and 50% was received one month after sale.

2. Taxation for the third quarter of 2018 amounting to $1,000,000 was due in the first month of that quarter.

3. In August 2018, the company bought a motor truck for $1,500,000. The agreement with the supplier was that a down-payment of $800,000 would be made in the second month of the third quarter in 2018 and the balance paid off in equal amounts during the subsequent two months.

4. The company is to receive insurance claim of $3,000,000 for damage done to its warehouse during heavy rains. The amount is to be disbursed as follows: $2,500,000 in July 2018; $250,000 in August 2018; and the balance in September 2018

. 5. Investments held at National Commercial Bank will mature in September 2018. The amount to be collected is expected to be $4,000,000. The company planned to pay dividends to, its shareholders amounting to $500,000 in December 2018. It also, planned to pay $1,600,000 in August 2018 for a plot of land to build a new warehouse.

6. In August 2018 the company sold a motor vehicle for $950,000 to one of its staff members while $400,000 written off as bad debt in 2008 was recovered in the second month of the third quarter in 2018. Rental income amounting to $1,560,000 per annum is budgeted for 2018.

7. Operating expenses amounted to $2,400,000 is budgeted for 2018. Included in this figure is monthly depreciation of $100,000.

8. Salesmen are paid commission based on the amounts collected from sales each month. The amount is 5% of sales collection each month. Miscellaneous expenses amounting to $144,000 monthly was not included in the operating expenses budget.

9. Records from the companys books revealed that 70% of purchases are for cash; 15% is paid for one month later; and the balance one month later.

The following table provides information on budgeted purchases for the periods indicated:

Budgeted Purchases

2018 $

January $1,000,000

February $1,200,000

March $2,000,000

April $1,400,000

May $ 2,200,000

June $1,600,000

July $1,500,000

August $2,400,000

September $ 2,600,000

October $1,100,000

November $2,700,000

December $1,600,000

Required:

(a) A cash collection summary from sales showing cash and credit collections separately for July - September of 2018. (12 marks)

(b) A payment summary for purchases showing cash purchases and credit purchases separately for July - September of 2018. (18 marks)

(c) A cash budget for July - September of 2018. Clearly show amounts for cash sales, credit sales, cash purchases, credit purchases and totals. (70 marks)