Question

Classique Household Furnishings & Appliances is a family-owned furniture store. You are the management accountant of the concern and have been given the task of preparing the cash budget for the business for the quarter ending September 30, 2018. Your data collection has yielded the following

Extracts from the sales and purchases budgets are as follows:

Cash Sales

$50,000 $65.000 $43,400 $52,800 $56,750

Sales Purchases On Account On Account

$480,000 $600,000 $720,000

$640,000

$800,000

$390.000 $360,000 $450,000 $400,000

$500,000

Month

May

June

July August September

An analysis of the records shows that trade receivables (accounts receivable) for sales on account are settled according to the following credit pattern, in accordance with the credit forms 5/30, n90:

50% in the month of sale 35% in the first month following the sale 15% in the second month following the sale

Accounts payable are settled as follows, in accordance with the credit forms - 4/30, n60 70% in the month in which the inventory is purchased 30% in the following month

Monthly rental is received from a tenant for storage space rental to him by Classique Household Furnishings & Appliances. The rental is $840,000 per annum and is received quarterly in advance

Rental relating to the quarter under review becomes due on July 1.

Computer equipment, which is estimated to cost $350,000, will be acquired for cash in August The manager has made arrangements with the seller to make a cash deposit of 50% of the amount upon signing of the agreement in August with the balance to be settled in four equal monthly instalments, starting in September 2018.

An investment instrument purchased by the company with a face value of $480,000 will mature on July 20, 2018 and will be liquidated on that date. At the same time, quarterly interest computed at a rate of 8% % per annum will also be collected.

Fixed operating expenses, which accrue evenly throughout the year are estimated to be $1,920.000 per annum including depreciation on non-current assets of $42,000 per month and are settled monthly

i)

iv)

vi)

vii)

viil)

Wages and salaries are expected to be $2,304,000 per annum and will be paid monthly

Other operating expenses are expected to be $144,000 per quarter and are settled monthly

In the month of August, furniture & fixtures, which cost $455,000, will be sold to an employee at a Inss of $20.000. Accumulated depreciation on the furniture & fixtures at that time is expected to be $305,000. The employee will be allowed to pay a deposit equal to 60% of the selling price in

Answer 1

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Budgeted cash collections for trade receivables	May	June	July	August	September	Jul- Sep	Note
Sales on account	480,000.00	600,000.00	720,000.00	640,000.00	800,000.00	2,160,000.00	A
50% of Credit sale in the same month (less 5% discount)	228,000.00	285,000.00	342,000.00	304,000.00	380,000.00	1,026,000.00	B= 50% of A less 5% discount.
35% of Credit sale in the following same month		168,000.00	210,000.00	252,000.00	224,000.00	686,000.00	C= 50% of A of previous month.
15% of Credit sale in the second month			72,000.00	90,000.00	108,000.00	270,000.00	D= 50% of A of previous to previous month.
Total Scheduled Collections for trade receivables			624,000.00	646,000.00	712,000.00	1,982,000.00	E=B+C+D
Expected cash disbursements for accounts payable		June	July	August	September	Jul- Sep
Purchases on account		360,000.00	450,000.00	400,000.00	500,000.00	1,350,000.00	G
70% paid in same month (less 4% discount)		241,920.00	302,400.00	268,800.00	336,000.00	907,200.00	H=G*70% less 4% discount
30% paid in next month			108,000.00	135,000.00	120,000.00	363,000.00	I= 30% of G of previous month.
Cash disbursements for accounts payable			410,400.00	403,800.00	456,000.00	1,270,200.00	J=H+I