Question
The garden supply company has the following business transaction estimates relating to the final quarter of 2020. Assume cash transactions where appropriate unless explained otherwise.
The garden supply company has the following business transaction estimates relating to the final quarter of 2020. Assume cash transactions where appropriate unless explained otherwise.
October November December
$ $ $
Total Sales See note 1. 110,000 130,000 180,000 |
Receipts from Accounts Receivable To calculate See note 2. |
Wages 30,000 35,000 40,000 |
Office Equipment 0 7,000 0 |
Lease Prepayment for 2021 0 0 4,000 |
Administrative Expenses 3,000 3,000 3,000 |
Accrued Expenses 0 0 8,000 |
Depreciation on Office Equipment 7,000 8,000 8,000 |
Maturing of Term Deposit 8,000 0 0 |
Credit Purchases 70,000 80,000 90,000 |
Payments of Accounts Payable To calculate - See note 3. |
Drawings 3,000 4,000 5,000 |
Notes
1. 30% of total sales are cash sales. 70% of total sales are on credit.
2. Actual receipts from Accounts Receivable are 77% of the previous months credit sales and the balance owing is received in the following month. Actual credit sales were $70,000 in both August and September 2020.
3. Credit purchases on Accounts Payable are paid 60% in the month of purchase with the remainder paid in the month following. Credit purchases in September 2020 were $60,000.
4. Garden Supplys cash balance at 1 October 2020 was $555.
Prepare a month by month cash budget for the quarter ending 31 December 2020 and comment briefly on the monthly cash positions. (15 marks)
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