PART A

1. Cool-Ices balance sheet for 30 November follows. Use it and the following information to prepare a cash budget for Cool-Ice for December.

• 80% of sales are on account, of which half are collected in the month of the sale, 49% are collected the following month and 1% are never collected and are written off as bad debts.
• All purchases of materials are on account. Cool-Ice pays for 70% of purchases in the month of purchase and 30% in the following month.
• All other costs are paid in the month incurred.
• Cool-Ice is making monthly interest payments of 1% (12% per year) on a $20 000 long-term loan.
• Cool-Ice plans to pay the $500 of taxes owed as of 30 November in the month of December. Income tax expense for December is zero.
• 40% of processing and set-up costs, and 30% of marketing and general administration costs, are depreciation.

Cool-Ice

Balance sheet as of 30 November

Assets

Cash				$587
Accounts receivable	$4 800
Less: Allowance for bad debts	96			4 704
Inventories
Direct materials				169
Finished goods				974
Fixed assets	$190 000
Less: Accumulated depreciation	55 759			134 241
Total assets				$140 675
Liabilities and equity
Accounts payable				$696
Taxes payable				500
Interest payable				200
Long-term debt				20 000
Ordinary shares				10 000
Retained earnings				109 279
Total liabilities and equity				$140 675