Question

I've did most of the work i just need someone to check if my work is correct

Maryam and Hanadi are planning to open a shop to sell female shoes in Abu Dhabi. The venue of the shop is decided to be a rented premises in Marina Mall. They wish to start their operations from 01 July, 2020.

The following information is available about the company’s operations. i. The company predicts a sale price of AED 350 per unit. Sales in units from July – September, 2020 are as follows: Month Sales (Units) July 250 August 300 September 400

All sales are on credit and are collected in the following ratio: • 45 percent collected in the month of sale, • 30 percent collected in the month after sale. • 25 percent collected in the second month after sale.

Cost of purchases are as follows. Month Cost (AED) July 120,000 August 135,000 September 110,000 All purchases are on credit. 40% percent of a month’s inventory purchases are paid in the month of purchases and 60% in the month after purchases. iii. Operating expenses are budgeted per month as follows. Operating expenses Amount (AED) Insurance 500 Utilities 400 Salaries & wages 7,000 Rent 8,000 Other expenses 5,500 iv. The company plans to borrow AED 55,000 in the month of July with an interest of 1.5% of the borrowed amount per month starting from August. The loan is to be paid in full at the end of September, 2020. v. The Company will have a cash balance of AED 33,000 on 01 July, 2020.

i have to create sales budget, schedule of expected cash collections from sales, Schedule of expected cash disbursements for purchases and expenses, Cash Budget.

i have did them but need an expert of look at them please and thanks

Answer 1

1. Sales Budget :- for the month of July 2020 :- 250 units @ 350 AED per unit - 87500 AED

For the month of August 2020 -300 units @ 350 AED per unit :- 105000 AED

For the month of September 2020 - 400 units @ 350 AED per unit - 140000 AED

2. Schedule of expected cash collection from Sales :-

July 2020 :- 45% of 87500 AED collected in July 2020 :- AED 39375

30% of 87500 AED to be collected in August 2020 - AED 26250

25% of 87500 AED to be collected in September 2020 - AED 21875

August 2020 :- 45% of 105000AED collected in August 2020 :- AED 47250

30% of 105000 AED to be collected in September 2020 - AED 31500

25% of 105000 AED to be collected in October 2020 - AED 26250

September 2020 - 45% of 140000 AED to be collected in September 2020 - AED 63000

30% of 140000 AED to be collected in October 2020 - AED 42000

25% of 140000AED to be collected in November 2020 - AED 35000

3. Schedule of expected Cash Disbursements for purchases and expenses

July 2020 : - 120000 AED , 40% paid in July 2020 :- AED48000, 60% paid in August 2020 - AED 72000 .

August 2020 - 135000 AED , 40% paid in August 2020 - AED 54000 , 60 % paid in September 2020 - AED 81000 .

September 2020 - 110000 AED , 40% paid in September 2020 - AED 44000 , 60% paid in October 2020 - AED 66000 .

4. Cash Budget :-

July 2020 - 39375 (minus) 500 (minus) 400(minus) 7000(minus) 8000(minus) 5500 = 17975 AED ( Balance after deducting Operating Expenses .

August 2020 - 26250+47250 AED = 73500 ( Collection)

73500 (minus) 500(minus) 400(minus) 7000(minus) 8000( minus) 5500 = 52100 AED

September 2020 :- 21875 +31500+63000 = AED 116375 ( Collection )

116375 (minus) 500 (minus) 400 (minus) 7000(minus) 8000(minus) 5500 = 94975 AED .