Project 3Cash budgets and budgeted financial statements (Chapters 4 and 5)

Question 1

P. Tiro provides you with the following figures:

March actual sales $42,000

April budgeted sales 39,000

May budgeted sales 36,000

June budgeted sales 25,200

Sales are expected to be 70% credit and 30% cash and include GST. Invoices for credit sales are issued at the end of the month.

Accounts receivable pay:

70% within 30 days of invoice receiving 5% discount. Discount is recognized in the month it is allowed.

20% within 60 days

5% within 90 days.

5% bad debts.

Accounts receivable balances as at 31 March are $47,400. The ageing list shows that this balance is dissected as follows:

Month of sales $

January 3,600

February 14,400

March 29,400

Purchases (GST inclusive) are paid for in the month in which they are made. Budgeted purchases are:

April $24,000

May 22,800

June 12,000

Marketing expenses (GST inclusive) are budgeted at 10% of sales and are paid in the month they are incurred.

Other expenses are expected to be:

April $9,000

May 7,200

June 10,800

Other expenses are paid in the same month they are incurred and include GST except for depreciation. Depreciation is included in other expenses and is $3,000 per month

Equipment will be paid for on 15 June for $30,000 (including GST)

GST is accounted for by the cash method

Cash balance at 31 March is $48,000

Required

Prepare a cash budget for April, May, and June showing monthly figures.