Question

“Diamond Company” is preparing a budget for the first quarter of year 2020. The following information is available:

• Total expected sales for last two months of 2019 and four months of 2020 are (in 000’s LE)

  	November	December	January	February	March	April
  Sales	200	200	160	160	180	150

• All sales are on credit and collections from sales are 60% in the month of sales, 30% in the next month, and 10% in the following month.
• Cost of goods sold is 70% of sales.
• The desired ending inventory every month is 30% of the next month's cost of goods sold.
• It is expected that ending inventory of December, 2019, will be valued at LE 33 600.
• All purchases are paid in the month of purchases.
• All cash operating expenses are paid when incurred and the following are the budgeted expenses per month:

• Wages LE 31 000, Advertising LE 5 000, Depreciation LE 16 000, Rent 12 000.

• It is planned to pay, for other cash operating expenses, the amount of LE 16 000 in January and LE 43 800 in February 2020.required : prepare cash pudget

Answer 1

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Diamond Company
Scheduled of expected collections	November	December	January	February	March	Jan-Mar		Note
Budgeted Sales Revenue	200,000.00	200,000.00	160,000.00	160,000.00	180,000.00	500,000.00		A
Collection in the same month	120,000.00	120,000.00	96,000.00	96,000.00	108,000.00	300,000.00		C=A*60%
Collection in the next month		60,000.00	60,000.00	48,000.00	48,000.00	156,000.00		D= 30% of A of previous month.
Collection in the 2nd month			20,000.00	20,000.00	16,000.00	56,000.00		E= 10% of A of previous to previous month.
Total Scheduled Collections			176,000.00	164,000.00	172,000.00	512,000.00		F=C+D+E
Merchandise Purchases Budget			January	February	March	Jan-Mar	April	Note
Budgeted Sales Revenue			160,000.00	160,000.00	180,000.00	500,000.00	150,000.00	See A
Cost of goods sold @ 70%			112,000.00	112,000.00	126,000.00	350,000.00	105,000.00	G=A*70%
Add: Closing inventory			33,600.00	37,800.00	31,500.00	31,500.00		H= 30% of F of next month.
Less: Opening			33,600.00	33,600.00	37,800.00	33,600.00		I= 15% of F of same month. For Jan its closing inventory of December.
Merchandise Purchases Budget			112,000.00	116,200.00	119,700.00	347,900.00		J
Expected cash disbursements for Merchandise Purchases			112,000.00	116,200.00	119,700.00	347,900.00		K=J
Cash budget			January	February	March	Jan-Mar		Note
Beginning Cash Balance			-	-	(44,000.00)	-
Plus: Collections			176,000.00	164,000.00	172,000.00	512,000.00		See F
Cash Available			176,000.00	164,000.00	128,000.00	512,000.00
Disbursements
Material Payment			112,000.00	116,200.00	119,700.00	347,900.00		See K
Wages			31,000.00	31,000.00	31,000.00	93,000.00
Advertising			5,000.00	5,000.00	5,000.00	15,000.00
Rent			12,000.00	12,000.00	12,000.00	36,000.00
Other cash operating expense			16,000.00	43,800.00	-	59,800.00
Total cash payments			176,000.00	208,000.00	167,700.00	551,700.00
Ending cash balance			-	(44,000.00)	(39,700.00)	(39,700.00)