Question

Rainbow Enterprises has presented the following estimates relating to 2018 activities: Quarter ending 31 March 30 June 30 September 31 December Sales revenue $830,000 $930,000 $1,030,000 $1,080,000 Purchases 544,000 433,000 413,000 443,000 Cost of sales 415,000 465,000 515,000 540,000 Marketing and administration expenses 196,000 196,000 196,000 196,000 Occupancy expenses 91,000 91,000 91,000 91,000 Depreciation expense 14,800 14,800 14,800 14,800 Sales in the December quarter of 2017 were $730,000. All sales are on credit, of which 65 per cent are collected in the quarter of sale and 35 per cent in the following quarter. Purchases are on credit, and entity policy is such that all purchases are paid for in the same quarter. The marketing and administration expenses incurred and paid are the same. Occupancy expenses incurred and paid are usually the same, except that the electricity bill (estimated to be $740) for December 2018 will not be paid until January 2019. A major IT hardware acquisition of $27,700, to be paid for in cash, is expected in the December quarter. The bank balance at 31 December 2017 was $18,490.

Prepare a cash budget (on a quarterly basis) for the 12 months ending 31 December 2018. (Please leave any answer fields without an entry blank. Enter negative amounts using either a negative sign preceding the number, e.g. -45, or parentheses, e.g. (45).) Rainbow Enterprises Cash budget for the quarters ending 31 December 2018 March ($) June ($) September ($) December ($) Total ($) Bank balance at end of monthOccupancy expensesReceipts from accounts receivableTotal cash receiptsCash paymentsPayments to accounts payableIT hardware acquisitionCost of SalesPurchasesTotal cash paymentsNet cash flowMarketing and administration expensesDepreciation ExpenseSales RevenueBank balance at start of monthCash receipts Net cash flowBank balance at end of monthCost of SalesSales RevenueCash paymentsCash receiptsOccupancy expensesPurchasesDepreciation ExpensePayments to accounts payableIT hardware acquisitionTotal cash paymentsReceipts from accounts receivableMarketing and administration expensesBank balance at start of monthTotal cash receipts Total cash paymentsDepreciation ExpenseCash receiptsMarketing and administration expensesCost of SalesNet cash flowOccupancy expensesBank balance at start of monthBank balance at end of monthReceipts from accounts receivableTotal cash receiptsCash paymentsPayments to accounts payableSales RevenueIT hardware acquisitionPurchases Payments to accounts payablePurchasesCost of SalesSales RevenueTotal cash paymentsTotal cash receiptsCash paymentsDepreciation ExpenseCash receiptsReceipts from accounts receivableMarketing and administration expensesOccupancy expensesNet cash flowIT hardware acquisitionBank balance at start of monthBank balance at end of month Bank balance at start of monthPurchasesPayments to accounts payableCost of SalesNet cash flowOccupancy expensesIT hardware acquisitionMarketing and administration expensesBank balance at end of monthSales RevenueDepreciation ExpenseCash receiptsReceipts from accounts receivableTotal cash receiptsTotal cash paymentsCash payments PurchasesPayments to accounts payableCost of SalesDepreciation ExpenseCash receiptsMarketing and administration expensesOccupancy expensesBank balance at start of monthBank balance at end of monthTotal cash paymentsReceipts from accounts receivableSales RevenueNet cash flowTotal cash receiptsCash paymentsIT hardware acquisition Occupancy expensesReceipts from accounts receivableBank balance at end of monthIT hardware acquisitionSales RevenueCash receiptsBank balance at start of monthCost of SalesPayments to accounts payablePurchasesNet cash flowDepreciation ExpenseTotal cash paymentsTotal cash receiptsCash paymentsMarketing and administration expenses Marketing and administration expensesBank balance at start of monthSales RevenueTotal cash paymentsNet cash flowIT hardware acquisitionOccupancy expensesTotal cash receiptsPurchasesCash paymentsCost of SalesPayments to accounts payableReceipts from accounts receivableBank balance at end of monthDepreciation ExpenseCash receipts Depreciation ExpenseNet cash flowBank balance at end of monthOccupancy expensesPurchasesBank balance at start of monthSales RevenueIT hardware acquisitionReceipts from accounts receivableCash receiptsTotal cash paymentsCost of SalesCash paymentsPayments to accounts payableMarketing and administration expensesTotal cash receipts Bank balance at start of monthPurchasesCost of SalesReceipts from accounts receivableDepreciation ExpenseMarketing and administration expensesTotal cash receiptsPayments to accounts payableIT hardware acquisitionCash receiptsBank balance at end of monthOccupancy expensesCash paymentsTotal cash paymentsNet cash flowSales Revenue Bank balance at start of monthTotal cash paymentsOccupancy expensesNet cash flowSales RevenueIT hardware acquisitionCost of SalesPayments to accounts payableCash paymentsTotal cash receiptsMarketing and administration expensesBank balance at end of monthPurchasesDepreciation ExpenseCash receiptsReceipts from accounts receivable Payments to accounts payableBank balance at start of monthCash receiptsSales RevenueTotal cash paymentsNet cash flowIT hardware acquisitionCost of SalesBank balance at end of monthTotal cash receiptsReceipts from accounts receivablePurchasesDepreciation ExpenseCash paymentsMarketing and administration expensesOccupancy expenses

Answer 1

			Cash budget
						March	June	September	December	Total
	Bank balance at start of month					18490	-17510	157490	452490
	Receipts from accounts receivable				(Note:1)	795000	895000	995000	1062500	3747500
	Total cash receipts				a	813490	877490	1152490	1514990	4358460
	Less: Cash payments
	Payments to accounts payable					544000	433000	413000	443000	1833000
	Marketing and administration expenses					196000	196000	196000	196000	784000
	Occupancy expenses					91000	91000	91000	90260	363260
									(91000-740)
	IT hardware acquisition								27700
	Total cash payments				b	831000	720000	700000	756960	3007960
	Bank balance at end of month				a-b	-17510	157490	452490	758030
	Note:1
	Receipts from accounts receivable
						March	June	September	December
	Sales revenue				a	830000	930000	1030000	1080000
	Receipts from accounts receivable:
	65% in the quarter of sale				a*65%	539500	604500	669500	702000
	35% in the next quarter of sale					255500	290500	325500	360500
						(730000*35%)	(830000*35%)	(930000*35%)	(1030000*35%)
	Total receipts from accounts receivable					795000	895000	995000	1062500