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Hunt Chemicals is preparing a cash budget for June and July 2 0 1 9 . At the end of July 2 0 1 9

Hunt Chemicals is preparing a cash budget for June and July 2019. At the end of July
2019, the company has undertaken to repay a 100,000 loan to their bank which had
been borrowed in February 2019 to enable the business to survive during the seasonal
peak in the second quarter of the calendar year, April to June. The bank balance at 1
June 2019 is expected to be 17,500.
Budgeted sales revenues are as follows:
Additional information:
(i)70% of sales revenue is expected in the month of sales, subject to a 2% prompt
payment discount. 20% of sales revenue is expected in the month following sales. 7%
of sales revenue is expected to be received two months after sale and the remainder of
sales revenue is expected to be uncollectable.
(ii) The average selling price per unit is 100 and the average cost price is 75.,50% of
the purchase price of goods is expected to be paid in the month of purchase and 50% in
the following month.
(iii) Target closing inventory is equal to the cost of goods sold in the following month plus
25%.
(iv) Budgeted annual overheads are 800,000 which includes 300,000 of fixed costs of
which 60,000 is depreciation. The remainder of the overheads are variable costs which
vary with sales revenue and are paid in the month in which they occurred. The
budgeted sales revenue for 2019 is 3 million.
(v) A dividend of 40,000 will be paid and non-current assets costing 50,000 will be
purchased and paid for in June while corporation tax of 75,000 will be paid in July.
Required:
(a) Produce a cash budget for each of the months June and July 2019, in columnar form.
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