Question

An Enterprises has the following business transaction estimates relating to the final quarter of 2020.

     $                   $                    $

                                                            October           November          December

  

Credit Sales                                                    105600                112000                138000

Cash Sales                                                         21200                  26420               31200

                 

Notes

1. Actual Receipts from Accounts Receivable are 70% of the previous months

Credit Sales and the balance of 30% owing is received in the following month.

Credit Sales for September 2020 were $80,000 as they were in August 2020.

Cash Sales were $16,500 in August 2020 and $18,000 in September of 2020.

2. Payment of Accounts Payable is paid 60% of purchases in the month of

Purchase and the remaining 40% in the month following. Purchases in

September 2020 were $36,000.

3. The cash balance at 1 October 2020 was $52,890

Required:

Prepare a cash budget month by month for the quarter ending 31 December 2020.

Note that marks will be deducted for each incorrect posting to the cash budget.        

                              

Credit Sales                                                    105600                112000                138000

Cash Sales                                                         21200                  26420               31200

Receipts from Accounts Receivable `1.    calculate             calculate             calculate

Wages                                                                28200                 28200                   28200

Office Furniture                                                  6000                   7800                           0

Prepayments                                                              0                          0                     5275

Administrative Expense                                  10000                 10000                   11900

Depreciation on Office Furniture                    2500                   2500                     2500

Receipt of Loan                                                         0              100000                          0

Credit Purchases                                              42000                 42000                   58000

Payments of Accounts Payable 2.             calculate           calculate               calculate

Accrued Expenses                                                      0                          0                     6700

can you do ASAP THANKS

Answer 1

Out of $80,000 credit sales of August 70% is received in September and rest 30% is received in October.

Similarly 70% of September dues are received in October and rest in November.

Similarly 70% of October dues are received in November and rest in December.

Calculation of receipts from accounts receivable

August September October November December

Credit Sales $80,000   $80,000 $105,600 $112,000 $138,000

Receipts from previous month(70%) $80,000*70% $80,000*70% $105,600*70% $112,000*70% =$56,000 =$56,000 =$73,920 =$78,400

Received in following month(30%) $80,000*30% $80,000*30%    $105,600*30% =$24,000 =$24,000 =$31,680

Total receipts $80,000 $97,920 $110,080

Credit purchase in September is paid 60% in September and rest 40% in October.

Credit purchase in October is paid 60% in October and rest 40% in November.

Credit purchase in November is paid 60% in November and rest 40% in December.

Calculation of payments to accounts payable

August September October November December

Credit Sales - $36,000 $42,000 $42,000   $58,000

Payment in same month(60%) $36,000*60% $42,000*60% $42,000*60 $58,000*60% =$21,600 =$25,200 =$25,200 =$34,800

Payment in following month(30%) $36,000*40% $42,000*40%    $42,000*40% =$14,400 =$16,800 =$16,800

Total Payments    $39,600 $42,000 $51,600

Cash Budget

October November December

Opening Balance $52,890 $109,890 $288,320

Receipts

Cash Sales $21,200 $26,420 $31,200

Collections $80,000 $97,920 $110,080

Receipts on Loan 0 $100,000 0

Total Receipts $101,200 $224,340 $141,280

Balance $154,090 $334,230 $429,510

Payments

Wages $28,200 $28,200 $28,200            

Office Furniture $6,000 $7,800 0

Prepayments 0 0 $5,275

Administrative Expense $10,000 $10,000 $11,900

Total Payments $44,200 $46,000 $45,375

Closing Balance $109,890 $288,320 $384,135

Depreciation on furniture does not affect the cash budget as no cash flow is there.

There is no impact of accrued expenses on cash budget

It is assumed wages and administrative expenses are paid.

Office furniture is assumed to be purchased.

Closing Balance of October is opening balance of November.