Question 2 (Approximate completion time: 50 mins) CLO 4 (Total 35 Marks)

At the beginning of April 2020, Broderick & Co. Ltd had a closing cash balance of $500,000 at the bank. The companys financial year ends on December 31^st each year. Cash budgeting is critical to the companys financial information needs. The following information was extracted from the companys records:

1. Budgeted Sales

2020	$
February	700,000
March	800,000
April	900,000
May	650,000
June	750,000
July	600,000
August	850,000
September	600,000

The companys records indicated that 60% of the companys sales were for cash; and 40% was received the month after sale.

(2) Taxation for the first quarter of 2020 amounting to $280,000 was due in the first month of the second quarter.

(3) In February 2020 the company bought a motor truck for $3,000,000. The agreement with the supplier was that a down-payment of $2,000,000 would be made in the last month of the first quarter in 2020 and the balance paid off in equal amounts during the first two months of the second quarter in 2020.

(4) The company is to receive insurance claim of $1,500,000 for damage done to its warehouse during heavy rains. The amount is to be disbursed as follows: $600,000 in May 2020; $400,000 in June 2020; and the balance in July 2020.

(5) Investments held at Bank of Kingston will mature in June 2020. The amount to be collected is expected to be $1,000,000. The company planned to pay dividends to its shareholders amounting to $200,000 in May 2020. It also, planned to pay $450,000 in April 2020 for a plot of land to build a new warehouse.

(6) In May 2020 the company sold a motor vehicle for $300,000 to one of its staff members while $200,000 written off as bad debt in $2019 was recovered in the first month of the second quarter in 2020. Rental income amounting to $600,000 per annum is budgeted for 2020.

(7) Operating expenses amounted to $3,600,000 is budgeted for 2020. Included in this figure is monthly depreciation of $50,000.

(8). Miscellaneous expenses amounting to $60,000 monthly was not included in the operating expenses budget.

(9) All purchases are made for cash. The following table provides information on budgeted purchases: Budgeted Purchases

2020	$
February	500,000
March	350,000
April	290,000
May	250,000
June	270,000
July	380,000
August	450,000
September	440,000

Required:

1. A cash collection summary for sales showing cash and credit collections separately for the second quarter of 2020. (6 marks)

2. A payment summary for purchases showing disbursement for purchases for the second quarter of 2020. (4 marks)
3. A cash budget for the second quarter of 2020. Clearly show amounts for cash sales, credit sales, cash purchases and totals. (25 marks)