At the end of September 2005, Burgess Ltd. Had a bank balance of $275,000. Cash budgeting is critical to the company's financial information needs. The following information was extracted from the company's records: 1. The table below provides information on budgeted sales for the periods indicated: The company's records indicated that 50% of the company's sales were for cash; and 50% was received one month after sale. 2. Taxation for the last quarter of 2005 amounting to $1,000,000 was due in the last month of the last quarter. 3. In October 2005, 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 first month of the last quarter in 2005 and the balance paid off in equal amounts during the last two months of the last quarter in 2005. 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 September 2005; $250,000 in October 2005; and the balance in November 2005. 5. Investments held at bank of China will mature in December 2005. 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 January 2006. It also, planned to pay $1,600,000 in November 2005 for a plot of land to build a new warehouse. 6. In October 2005 the company sold a motor vehicle for $950,000 to one of its staff members while $400,000 written off as bad debt in 2003 was recovered in the second month of the last quarter in 2005. Rental income amounting to $1,560,000 per annum is budgeted for 2005. 7. Operating expenses amounted to $2,400,000 is budgeted for 2005 . 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 company's 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: Required: (a) A cash collection summary from sales showing cash and credit collections separately for October - December of 2005. (12 marks) (b) A payment summary for purchases showing cash purchases and credit purchases separately for October - December of 2005. (18 marks) (c) A cash budget for October - December of 2005. Clearly show amounts for cash sales, credit sales, cash purchases, credit purchases and totals. ( 70 marks)
