Answer to Question #210985 in Accounting for Anisha Kumar

Question

  Sales

Purchases

April

$72000

$42000

May

66000

48000

June

60000

36000

July

78000

54000  

§ Receipts from customers are normally 70 per cent in the month of sale, 20 per cent in the month following the sale, and 9 per cent on the second month following the sale. The balance is expected to be uncollectible.

§ Albury takes full advantage of the 2 per cent discount allowed on purchases paid for by the 10^th day of the following month.

§ Purchases for August are budgeted at $60 000, and sales for August are forecast at $66 000.

§ Cash payments for expenses (other than purchases) are expected to be $14 400 for the month of August.

§ Albury cash balance on 1 August was $22 000.

Required

Prepare a cash budget for Albury for August that includes:

1.   Expected cash receipts during August.

2.   Expected cash payments during August.

3.   Expected cash balance on 31 August.

Answer 1

1.   Expected cash receipts during August.

9% Sales receipts from June (60,000*9%) $5, 400

20% Sales receipts from July (78,000*20%) $15,600

70% Sales receipts in August (66,000*70%) $46,200

Total expected receipts in August $67,200

2.   Expected cash payments during August.

Purchases in August $60,000

Less 2% Discount Allowed -$1,080

(2%*54000)

Expected payments for Expense $ 14,400

Expected Cash payments on August $73,320

3.   Expected cash balance on 31 August.

Opening Cash balance $22,000

Expected cash receipts during August $67,200

Expected Cash payments in August ($73,320)

Expected Cash balance on 31 August $15,880