Cash budgeting provides you with information that assist in planning the company's future cash needs. As the Cost Accountant of Jamaica Innovation Company Ltd you have been provided with the following information that was extracted from the company's records during 2014.

The company's financial year runs from January to December of each year.

(1) The following table provides information on budgeted sales for the periods indicated:

Budgeted sales

2014 $

January 1,700,000

February 1,450,000

March 2,000,000

April 2,500,000

May 2,250,000

June 1,500,000

July 1,850,000

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The company's records revealed that the company collects 3/4 of its sales revenue in the month of sale and 1/4 the following month.

Operating expenses are budgeted to be $3,000,000 annually. Included in this figure is monthly depreciation of $50,000.

At the end of March 2014 the company had a credit balance at the bank amounting to $2,500,000.

Taxation for the first quarter of 2014 amounting to $300,000 is to be paid in April 2014, while a final payment of $2,050,000 will be made on lot of land in May 2014.

Insurance and miscellaneous expenses amounting to $55,000 and $30,000 respectively are expected to be incurred monthly. These amounts have not been included in the operating expenses budget.

In May 2014, the company sold one of its machines to a competitor for $300,000 and an investment amounting to $2,200,00 will be collected in June 2014.

(7)

Budgeted purchases

2014

January 750,000

February 1,000,000

March 1,400,000

April 1,250,000

May 850,000

June 900,000

July 800,000

The company's records revealed that 70% of purchases are paid for as cash in the month of purchase and 30% is paid for two months later.

(8) An amount of $280,000 owed to the company and written off in 2013 was recovered in April 2014. In April 2014 the company spent $500,000 servicing its fleet of motor vehicles.

This amount was not a part of its operating expenses budget. It also planned to pay dividends amounting to $600,000 to its shareholders in June 2014.

Required:

(a) A cash collection summary from sales, showing cash and credit collections separately for the second quarter of 2014.

(6 marks)

(b) A payment summary for purchases showing cash purchases and credit purchases separately for the second quarter of 2014.

(6 marks)

(c) A cash budget for the second quarter of 2014. Clearly show amounts for cash sales, credit sales, cash purchases, credit purchases and totals