Question

Soto Supplies Ltd sells carry bags for laptop computers. John Birt is responsible for preparing Soto Supplies master budget, and he has assembled the data below for May and June 2020.

	May ($)	June ($)
Cash sales	6,000	5,000
Credit sales	49,000	56,000
Credit purchases	32,000	36,000
Wages expense	12,000	13,200
Rent expense	1,200	1,200
Other miscellaneous expenses	3,200	2,400
Cost of sales	30,600	33,000
Depreciation expense	6,200	6,000
Cash proceeds from the sale of old machinery		2,000
Payment of dividends		6,000

• Collections from debtors (accounts receivable) normally have the following pattern:    30 per cent in the month of sale, 60 per cent in the month following the sale, and 10 per cent in the second month following the sale.
• Credit sales in March and April were $52,000 and $44,000 respectively.
• Credit purchases are paid for in the month following the purchase. Credit purchases in April were $34,000.
• The company plans to repay as much as the company can of a loan in June but leaving an ending cash balance at the end of June of $4,000. The payment of this loan must be included in the cash budget in June.
• The cash balance at 1^st May was $4,000.
• Wages, rent and other miscellaneous expenses are paid in the month in which the expense arises.

1. Prepare a cash budget for May and June   
2. What is the amount of accounts payable at 30^th June?   

	May ($)	June ($)

Answer 1

Answer:

Expected Cash collections from customers
	May	June
Cash Sales	$6,000	$5,000
Cash from March Credit Sales	$5,200	-
Cash from April Credit Sales	$26,400	$4,400
Cash from May Credit Sales	$14,700	$29,400
Cash from June Credit Sales	-	$16,800
	$52,300	$55,600

Expected Cash disbursements for inventory
	May	June
April Inventory purchase	$34,000	-
May Inventory purchase	-	$32,000
	$34,000	$32,000

Soto Supplies Ltd.
Cash Budget
For the month of May and June
	May		June
Beginning Cash Balance		$4,000		$5,900
Add: Collection from customers		$52,300		$55,600
Add: Proceeds from sale of a machinery		-		$2,000
Total Cash available		$56,300		$63,500
Less: Cash Disbursements
Payments to suppliers for inventory	$34,000		$32,000
Wages Expenses	$12,000		$13,200
Rent expense	$1,200		$1,200
Other miscellaneous expenses	$3,200		$2,400
Dividends paid	-		$6,000
Total Cash Disbursements		$50,400		$54,800
Excess (Deficiency) of cash over disbursements		$5,900		$8,700
Financing:
Borrowing
Repayments			($4,700)
Interest
Total Financing		$0		($4,700)
Ending Cash Balance		$5,900		$4,000

$4,700 are repaid (outflow) during the month of June hence shown with parentheses.

Account payable on June 30 = $36,000