Notes

1. 30% of total sales are cash sales. 70% of total sales are on credit.

2. Actual receipts from Accounts Receivable are 80% of the previous months credit sales and the balance of 20% owing is received in the following month. For example if we had credit sales of $100,000 in January, we would expect to receive $80,000 in February and $20,000 in March. Actual credit sales were $60,000 in both August and September 2020.

3. Credit purchases on Accounts Payable are paid 60% in the month of purchase and the remaining 40% in the month following. Credit purchases in September 2020 were $50,000.

4. Garden Supplys cash balance at 1 October 2020 was $555.

Required:

Prepare a month by month cash budget for the quarter ending 31 December 2020 and comment briefly on the monthly cash position.

1. The garden supply company has the following business transaction estimates relating to the final quarter of 2020. October November December $ $ $ Total Sales - See note 1. 110,000 140,000 160,000 Receipts from Accounts Receivable To calculate - See note 2. Wages 35,000 35,000 40,000 Office Furniture 0 10,000 0 Lease Prepayment for 2021 0 0 6,000 Administrative Expenses 5,000 5,000 7,000 Accrued Expenses 0 0 8,000 Depreciation on Office Furniture 8,000 9,000 9,000 Maturing of Term Deposit 10,000 0 0 Credit Purchases 60,000 70,000 80,000 Payments of Accounts Payable To calculate - See note 3. Drawings 3,000 3,000 3,000