Green Friends Ltd is a garden design and landscaping business that started operations on 1 September 2020. The following information has been provided by the firm.

In September, cash sales were $5,000 and credit sales $45,000. Total expected sales in the following three months are: $70,000 in October; $78,000 in November; and $82,000 in December. The company expects 10% of the sales of each month to be cash sales and the remainder credit sales. Credit sales are expected to be collected 20% in the month of the sale, 50% in the next month, and 30% in the following month.

All purchases of inventory are on credit. Purchases of inventory in September were $18,000. The company estimates purchases in the following three months to be: $19,000 in October, $20,000 in November and $21,000 in December. Purchases are paid 80% in the month of purchase, and 20% in the following month.

Wages expense is estimated to be $15,000 in October, $18,000 in November and $19,000 in December, paid in cash.

Other operating expenses are budgeted to be $12,000 in October, $14,000 in November and $18,000 in December, paid in cash.

Depreciation expenses of $1,250 per month are expected.

The cost of sales is estimated as 25% of sales revenue each month.

In October, computers costing $8,000 will be purchased and paid in cash.

In December a cash dividend of $20,000 will be paid.

In November, it is expected to receive $400 cash from the sale of old equipment at its net book value.

The cash balance at 1^st October 2020 was $7,500

1. Prepare a Budgeted Income Statement for the period October December 2020.
2. Prepare a schedule of estimated receipts from debtors (accounts receivable) for the months of October, November and December 2020.
3. What is the amount of accounts receivable at 31^st December 2020?
4. Prepare a cash budget for October, November and December 2020
5. What is the amount of accounts payable at 31^st December 2020?
6. How can you improve the cash budget?