Allen International is in the construction business. In 2010, it is expected tha
ID: 2463150 • Letter: A
Question
Allen International is in the construction business. In 2010, it is expected that 30 percent of a months sales will be recieved in cash, with the balance being recieved the following month. Of the purchases, 60 percent are paid the following month, 30 percent are paid in two months and the remaining 10 percent are paid during the month of the purchase.
The sales force recieves $2,000 a month base pay plus a 4 percent commission. Labor expenses are expected to be $6,000 a month. Other operating expenses are expected to run about $5,000 a month, including 1,000 for depreciation.
The ending cash balance for 2009 and 28,000.
2009-Actual Sales Purchase
November $140,000 $80,000
December 160,000 100,000
2010-Budgeted Sales Purchase
January $90,000 $90,000
Febuary 80,000 100,000
March 100,000 80,000
Prepare a cash budget and determine the projected ending cash balances for the first three months 2010.
Explanation / Answer
Cash Budget fot first three months of 2010
(160,000*70%)
=112,000
(90,000*30%)
= 27,000
(90,000*70%)
= 63,000
(80,000*30%)
= 24,000
(80,000*70%)
=56,000
(100,000*30%)
= 30,000
(80,000*30%)
= 24,000
(100,000*60%)
= 60,000
(100,000*30%)
30,000
(90,000*10%)
= 9,000
(90,000*60%)
= 54,000
(90,000*30%)
= 27,000
(100,000*10%)
= 10,000
(100,000*60%)
= 60,000
(80,000*10%)
= 8,000
(2000+90,000*4%)
= 5600
(2000+80,000*4%)
5200
(2000 + 100,000*4%)
= 6000
Note:-Opening cash balance of January not given , so taken it as zero.
Particulars January February March Cash Receipts Opening = 0 Opening = 30,400 Opening = 8,200 Sales made in December(160,000*70%)
=112,000
Sales made in January(90,000*30%)
= 27,000
(90,000*70%)
= 63,000
Sales made in February(80,000*30%)
= 24,000
(80,000*70%)
=56,000
Sales made in March(100,000*30%)
= 30,000
Less-Cash Payments Purchases made in November(80,000*30%)
= 24,000
Purchases made in December(100,000*60%)
= 60,000
(100,000*30%)
30,000
Purcahses made in January(90,000*10%)
= 9,000
(90,000*60%)
= 54,000
(90,000*30%)
= 27,000
Purcahases made in February(100,000*10%)
= 10,000
(100,000*60%)
= 60,000
Purchases made in March(80,000*10%)
= 8,000
Payment to Sales Force(2000+90,000*4%)
= 5600
(2000+80,000*4%)
5200
(2000 + 100,000*4%)
= 6000
Labor Expenses 6,000 6,000 6,000 Cash Operating Expenses 4000 4000 4000 Closing Cash Balance 30,400 8,200 16,800Related Questions
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