Question 1

Green Friends Ltd is a garden design and landscaping business that started operations on 1 September 2020. The following information has been provided by the firm.

In September, cash sales were $17,500 and credit sales $32,500. Total expected sales in the following three months are: $70,000 in October; $78,000 in November; and $82,000 in December. The company expects 35% of the sales of each month to be cash sales and the remainder credit sales. Credit sales are expected to be collected 40% in the month of the sale, 30% in the next month, and 30% in the following month.

All purchases of inventory are on credit. Purchases of inventory in September were $40,000. The company estimates purchases in the following three months to be: $26,000 in October, $30,000 in November and $32,000 in December. Purchases are paid 80% in the month of purchase, and 20% in the following month.

Wages expense is estimated to be $19,000 in October, $20,000 in November and $22,000 in December, paid in cash.

Other operating expenses are budgeted to be $18,000 in October, $19,000 in November and $20,000 in December, paid in cash.

Depreciation expenses of $1,100 per month are expected.

The cost of sales is estimated as 45% of sales revenue each month.

On 1 September, equipment costing $12,000 was purchased and paid in cash.

Cash estimated from issue of shares in November: $25,000

The cash balance at 1^st October 2020 was $1,500

1. Prepare a Budgeted Income Statement for the period October December 2020.

Budgeted Income Statement For the period October December 2020
	October - December ($)

Prepare a schedule of estimated receipts from debtors (accounts receivable) for the months of October, November and December 2020.

		Month of cash collection
Month	Credit Sales	Oct	Nov	Dec

What is the amount of accounts receivable at 31^st December 2020?