Question

QUESTION 2                                                                                                                         

Albert Holland, manager of Palm Beach Surfing Supplies has provided the following estimated figures for the months of July to October:

• Estimated cash balance at the end of August is $50 000.
• Actual sales for July and August and estimated sales for September and October are as follows:

	July	August	September	October
Cash sales	33 000	31 000	42 000	30 000
Credit sales	60 000	80 000	100 000	50 000

• Analysis of past records has shown that credit sales are collected over a three-month period, with 60 per cent being collected in the month of the sale, 30 per cent in the next month, and the remainder in the following month.
• Selling and administrative expenses are budgeted to be paid $8 000 each month.
• A new truck will be purchased for $40 000, with a $5 000 cash payment in September and the balance to be paid in December.
• At the beginning of September, the old truck will be sold for cash $8 500.
• All purchases of supplies are paid for in the month following purchase. Purchases for August are $95 000, and estimated purchases for September are $55 000 and for October are $75 000.
• Depreciation for each month is $3 000.
• Cost of sales is 70% of total sales each month.   

(a) Prepare the Budgeted Income Statement for September and October.    

Budgeted Income Statement For the months of September and October
	September	October

(b) Prepare a schedule of estimated receipts from debtors (accounts receivable) for the months of September and October.       

		Month of cash collection
Month	Credit Sales	September	October

(c) What is the amount of accounts receivable at 31st October?  

4. Prepare a cash budget for September and October                              

	SEPTEMBER $	OCTOBER $

(e) Briefly comment on the budgeted cash position for September and October.   

                            

Answer 1