Question 6 Use the infomation to formulate a simplified cash budget for Heidi\'s

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Question 6 Use the infomation to formulate a simplified cash budget for Heidi's Place Dec. Janb Ma Sales Inventory Purchases Other Cash Expenses Capital Purchases S20,000 30,000 S40,000 S50,000 16,00017,000 18,00021,000 13,000 14,000 15.000 16000 16,000 0 (With cash) Sales: 40% of the sales are cash while the balance are credit sales. 605, of the credit sales are collected in the month of sale and the balance in the next month Purchases 70% of the purchases are paid in the month of the purchase while 30% are paid in the next month. Inventory: Assume that other cash expenses and capital purchases are paid for during the month they are incurred (for example, other cash expenses of $13,000 for December were paid in December) Assume that the beginning cash balance of January 1 is $4,000 Required: Prepare a cash budget using the cash reeeipts and disbursements approach for the months of January- March.

Explanation / Answer

Answer

Dec

Jan

Feb

Mar

Total Sales

20000

30000

40000

50000

40% Cash sales

8000

12000

16000

20000

60% is Credit Sale

12000

18000

24000

30000

60% of credit sale collected in same month

7200

10800

14400

18000

40% of credit sale collected in following month

4800

7200

9600

12000

Jan

Feb

Mar

Quarter

Cash Sales

12000

16000

20000

48000

Collection from accounts receivables:

For December sale

4800

4800

For January Sale

10800

7200

18000

For February Sale

14400

9600

24000

For March Sale

18000

18000

TOTAL cash collections

$27600

$37600

$47600

$112800

Dec

Jan

Feb

Mar

Purchases (Inventory)

16000

17000

18000

21000

70% paid in same month

11200

11900

12600

14700

30% paid in following month

4800

5100

5400

6300

Jan

Feb

Mar

Quarter

Cash disbursement for:

December purchase

4800

4800

January Purchase

11900

5100

17000

Feb Purchase

12600

5400

18000

March Purchase

14700

14700

Total cash disbursement

$16700

$17700

$20100

$54500

Jan

Feb

Mar

Quarter

Beginning Cash Balance

4000

900

-10200

4000

Add: Cash Collections

27600

37600

47600

112800

Total cash available

31600

38500

37400

116800

Less: Cash Disbursements

For purchases of inventory

16700

17700

20100

54500

Other cash expenses

14000

15000

16000

45000

Capital Purchase

16000

16000

Total cash disbursement

30700

48700

36100

115500

Excess of cash available over disbursement

900

-10200

1300

1300

Ending cash balance

$900

$(10200)

$1300

$1300

Dec

Jan

Feb

Mar

Total Sales

20000

30000

40000

50000

40% Cash sales

8000

12000

16000

20000

60% is Credit Sale

12000

18000

24000

30000

60% of credit sale collected in same month

7200

10800

14400

18000

40% of credit sale collected in following month

4800

7200

9600

12000

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