CASH BUDGET REVIEW QUESTIONS

1

Question 1

The following information relates to the budgeted figures of a firm:

January Feb. March April May June

N$ N$ N$ N$ N$ N$

Wages 7 000 11 000 8 000 11 000 9 000 10 000

Purchases 32 00 23 000 37 000 28 000 27 000 3 000

Sales 60 000 80 000 70 000 90 000 80 000 50 000

1. It is expected that the cash balance on 1 April will be N$ 20 000.

2. The wages are paid in the month they are incurred.

3. It is company policy to pay creditors 3 months after purchases.

4. 10% of the monthly sales are for cash and 90% are sold on credit.

5. The Company has learned that it normally collects its debts

from debtors as follows:

50 % during the month of sale.

30 % during the month following the month of sale.

10% during the second month after sale.

6. It is intended to repay a loan of N$ 15 000 on April 30.

7. Delivery is expected in May of a new machine costing N$ 45 000 of which

N$ 15 000 will be paid on delivery and N$ 15 000 in each of the following two

months.

Required:

Prepare a cash budget for each of the three following months: April, May and June in column form