Required:1. Prepare a budgeted income statement for February and March2. Prepare a cash budget for February and Marc ABC Company operates a retail business. The following data shows the budgeted amounts for the followingmonths:SalesLaborExpensesJanuaryFebruary 60,000.00 3,000.00 6,000.0040,000.00 3,000.00 4,000.00March160,000.00 5,000.00 7,000.00April120,000.00 4,000.00 7,000.00Other information is as follows:1. Purchases are 75% of sales2. Management policy requires to have sufficient inventory at the end of each month to meet the salesdemand for the next half month3. Payables for materials and expenses are paid in the following month after the purchases are made orexpenses incurred.4. Labor is paid in full at the end of each month5. Expenses include a monthly depreciation charge of P2,0006. Sales projections are based on the following assumptions:a. 75% of sales are cashb. 25% of sales are collectible within one month7. The company will purchase equipment for cash costing P18,000 in February and pay dividendsamounting to P20,000 in March. The opening balance of cash on February 1 is P1000

Cash budget is the estimated cash flows from the business operations and Income statement is the…

Answered: 1. Prepare a budgeted income statement…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Required:
1. Prepare a budgeted income statement for February and March
2. Prepare a cash budget for February and Marc

ABC Company operates a retail business. The following data shows the budgeted amounts for the following
months:
Sales
Labor
Expenses
January
February 60,000.00 3,000.00 6,000.00
40,000.00 3,000.00 4,000.00
March
160,000.00 5,000.00 7,000.00
April
120,000.00 4,000.00 7,000.00
Other information is as follows:
1. Purchases are 75% of sales
2. Management policy requires to have sufficient inventory at the end of each month to meet the sales
demand for the next half month
3. Payables for materials and expenses are paid in the following month after the purchases are made or
expenses incurred.
4. Labor is paid in full at the end of each month
5. Expenses include a monthly depreciation charge of P2,000
6. Sales projections are based on the following assumptions:
a. 75% of sales are cash
b. 25% of sales are collectible within one month
7. The company will purchase equipment for cash costing P18,000 in February and pay dividends
amounting to P20,000 in March. The opening balance of cash on February 1 is P1000

Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.

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