Question 4. (6 Marks)

The Hamdan Accounting Associates are preparing their cash budget for the four months ending April 30, 2020. The credit department has compiled the following financial data:

a) Credit sales are budgeted at:

	Jan	Feb	March	April
CREDIT SALES	8,000	15,000	20,000	25,000

b) The collection of the credit sales has been established by the credit department as follows:

1) 40% of the credit sales will be collected in the month of sale,

2) 30% of the credit sales will be collected in the first month after sale

3) 20% of the credit sales will be collected in the second month after sale.

c) The cost of purchases of raw materials is budgeted at:

Purchases Materials

3,000

3,000

4,000

5,000

d) Wages are budgeted at:

Wages

2,000

1,000

1,000

1,000

e) Overhead costs are budgeted at:

Overhead costs

1,000

1,000

1,000

1,000

f) Income taxes are budgeted to be paid:

Taxes

2,000

g) The cash on hand at the (Jan1) beginning of the year amounted to $2,000

Required:

a) (5 Marks) Prepare the cash budget for the four months ended April 30, 2020 (Collections 3 Marks, Payments 1 Mark, Cash balance 1 Mark).

b) (1 Mark) Using the information above, what is the amount uncollected each month?