Q 1 ] The following information was revealed to the January operating budget for TAWAKAL Corporation.

o Budgeted sales for January $100,000 and February $200,000.

o Collections for sales are 60% in the month of sale and 40% the next month.

o Gross margin is 30% of sales.

o Administrative costs are $10,000 each month

o Beginning accounts receivable is $20,000.

o Beginning inventory is $14,000.

o Beginning accounts payable is $60,000. (All from inventory purchases.)

o Purchases are paid in full the following month.

o Desired ending inventory is 20% of next month's cost of goods sold (COGS).

1. Calculate budgeted cash collections For January ?
2. Calculate, budgeted accounts receivable At the end of January ?
3. Calculate budgeted cost of goods sold For January ?
4. Calculate budgeted net income For January ?
5. Calculate budgeted cash payments for purchases For January ?
6. Calculate budgeted ending inventory At the end of January

Q 2 ] A HUGE OIL Company has budgeted sales revenues as follows:

June

July

August

Credit sales

$135,000

$145,000

$ 90,000

Cash sales

90,000

255,000

195,000

Total sales

$225,000

$400,000

$285,000

Past experience indicates that 60% of the credit sales will be collected in the month of sale and

the remaining 40% will be collected in the following month. Purchases of inventory are all on

credit and 50% is paid in the month of purchase and 50% in the month following purchase.

Budgeted inventory purchases are:

June

$300,000

July

$250,000

August

$105,000

Other cash disbursements budgeted:

(a) selling and administrative expenses of $48,000 each month,

(b) Dividends of $103,000 will be paid in July, and

(c) Purchase of equipment in August for $30,000 cash.

The company wishes to maintain a minimum cash balance of $50,000 at the end of each month.

The company borrows money from the bank at 8% interest if necessary to maintain the minimum cash balance.

Borrowed money is repaid in months when there is an excess cash balance. The beginning cash balance on July 1 was $50,000. Assume that borrowed money in this case is for one month.

Instructions:

Prepare cash budget for the months of July and August.

Prepare separate schedules for expected collections from customers and expected payments for purchases of inventory.