Question 3

Milestone Enterprises needs a cash budget for December 2020. The cash balance at the beginning of December is expected to be $ 18,000. The sales for October, November and December are expected to be as follows:

Information	October ($)	November ($)	December ($)
Cash Sales	26,000	21,000	30,000
Sales on Account (Credit Sales)	80,000	120,000	160,000
Total Sales	106,000	141,000	190,000

Sales on account are collected over a three-month period in the following rates:

20% in the month of sale,

50% in the month following sale

30 % in the second month following sale

Additional information includes:

(a) Purchases of inventory will total $ 100,000 for December; 20% will be paid for in December. Accounts payable from November's inventory purchases is $ 64,000, all of which will be paid in December.

(b) Selling and administrative expenses are budgeted at $ 52,000 for December; of which $ 16,000 is for depreciation, thus total expenses payable is $ 36,000 (52,000 16,000)

(c) An Equipment costing $ 72,000 will be purchased for cash during December, and other miscellaneous cash expenses of $ 12,000 will be paid during December.

Required

(a) Prepare a schedule of cash collections (cash and credit collections) for December (15 marks)

(b) Prepare a Cash Budget for the month of December (10 marks)

(15 + 10 = 25 marks)