Question 5 Budgeting (28 marks)

Go Car Repair Ltd intends to prepare a cash budget for December and January. The actual revenue for October and November and projected revenue for December and January are outlined below:

	Actual		Budgeted
	October	November	December	January
Cash Sales	63,000	61,000	72,000	60,000
Credit Sales	90,000	110,000	130,000	80,000
Total Sales	$153,000	$171,000	$202,000	$140,000

• The cash balance at the end of November is $60,000.

• Analysis of records has shown that credit sales are collected over a three-month period, with 50% collected in the month of the sale, 40% in the next month, and the remainder in the following month.
• Projected expenditure during December and January is as follows:
• Selling and administrative expenses are budgeted to be $88,000 each month.
• A new car hoist will be purchased for $100,000, with a $20,000 cash payment in December and the balance to be paid in March.
• The owner wants to maintain a minimum cash balance of $60,000.
• As more customers will want their vehicles serviced prior to Christmas, the company will need more supplies. Therefore, an order has been placed for $60,000 of inventory. This will arrive in late November and be paid in December.

Required:

1. Prepare a schedule showing receipts from customers for credit sales in December and January. (6 marks)

2. Prepare a cash budget for December and January by using the template below. (22 marks)

Go CAR REPAIR Ltd Cash budget for two months ended 31 January
	December	January	Total
ANTICIPATED RECEIPTS
Receipts from debtors
Cash sales
Total receipts
ANTICIPATED PAYMENTS
Selling and administration
Car hoist
Inventory consumables
Total payments
Excess (deficit) receipts over payments
Bank balance at the beginning of the month
Bank balance at the end of the month