Question A cash budget is being prepared for Hotels Inc for the month of May The following information has been gathered to assist in preparing the budget a Budgeted sales and production requirements are as follows Budgeted Sales $ 650,000 Production requirements Raw material to be used $ 301,000 Direct labour cost 85,000 Customers are allowed a 2 cash discount on accounts paid within 10 days after the end of the month of sale Only 50 of the payments made in the month following sale fall within the discount period Accounts receivable outstanding at April 30 were as follows Month Sales Accounts Percentage Percentage to receivable at of sales be collected April 30 Uncollected in May at April 30 January $ 340,000 $8,500 2 5 February 530,000 31,800 6 0 March 470,000 47,000 10 0 April 550,000 550,000 100 0 All January receivables outstanding will be collected in May and the collection pattern since the time of the sale will be the same in May as in previous months Raw material purchases are paid in the month following the purchase and $ 320,000 in accounts payable for purchases was outstanding at the end of April Accrued wages on April 30 were $ 11,000 All May payroll amounts will be paid within the month of May Budgeted operating expenses and overhead cost for May are as follows Overhead and other Total charges Indirect labour $ 34,000 Property taxes 1,500 Depreciation 25,000 Utilities 1,500 Wage benefits 9,000 Fire insurance expired 1,500 Amortization of patents 5,000 Spoilage of materials in the warehouse 1,500 $ 79000 Sales Salaries 45,000 Administrative salaries 15,000 Property taxes are paid in July of each year Utilities are billed and paid within the month Shipping cost for May will be $ 1,000 all payable in the month The cash balance at April 30 th was $5,750 Required Prepare a Cash collections schedule for the month of May Prepare a cash budget for May in good form Hotels Inc require a minimum cash balance of $ 5,500 at the end of each month and therefore a line of credit is set up to allow for borrowings to cover any deficiency in the ending cash balance

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Sep 18, 2024

Question A cash budget is being prepared for Hotels Inc for the month of May. The following information has been gathered to assist in preparing

Question

A cash budget is being prepared for Hotels Inc for the month of May. The following information has been gathered to assist in preparing the budget:

a. Budgeted sales and production requirements are as follows:

Budgeted Sales	$ 650,000
Production requirements
Raw material to be used	$ 301,000
Direct labour cost	85,000

Customers are allowed a 2% cash discount on accounts paid within 10 days after the end of the month of sale. Only 50% of the payments made in the month following sale fall within the discount period.

Accounts receivable outstanding at April 30 were as follows:

Month	Sales	Accounts	Percentage	Percentage to
		receivable at	of sales	be collected
		April 30	Uncollected	in May
			at April 30
January	$ 340,000	$8,500	2.5%	?
February	530,000	31,800	6.0%	?
March	470,000	47,000	10.0%	?
April	550,000	550,000	100.0%	?

All January receivables outstanding will be collected in May and the collection pattern since the time of the sale will be the same in May as in previous months.

Raw material purchases are paid in the month following the purchase and $ 320,000 in accounts payable for purchases was outstanding at the end of April.

Accrued wages on April 30 were $ 11,000. All May payroll amounts will be paid within the month of May.

Budgeted operating expenses and overhead cost for May are as follows:

Overhead and other		Total
charges
Indirect labour	$ 34,000
Property taxes	1,500
Depreciation	25,000
Utilities	1,500
Wage benefits	9,000
Fire insurance expired	1,500
Amortization of patents	5,000

Spoilage of materials in the warehouse	1,500	$ 79000
Sales Salaries		45,000
Administrative salaries		15,000

Property taxes are paid in July of each year.
Utilities are billed and paid within the month.
Shipping cost for May will be $ 1,000 all payable in the month.
The cash balance at April 30^th was $5,750.

Required

Prepare a Cash collections schedule for the month of May.

Prepare a cash budget for May in good form. Hotels Inc require a minimum cash balance of $ 5,500 at the end of each month and therefore a line of credit is set up to allow for borrowings to cover any deficiency in the ending cash balance.