ABC Company seeks your assistance in developing cash and other budget information for August, September, and October, 2

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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ABC Company seeks your assistance in developing cash and other budget information for August, September,
and October, 201A. On July 31, 201A, the company had cash of P22,000, accounts receivable of P874,000,
inventories of P618,800, and accounts payable of P266,110.
The budget is based on the following assumptions:
a. Sales
1. Sixty percent (60%) of the billings are collected within the month of sale, 25% are collected in the first
month after the month of sale, 10% are collected in the second month after the month of sale, and
5% are proved uncollectible.
b. Purchases
1. Sixty-five percent (65%) of all purchases of materials and selling and administrative expenses are paid
in the month purchased and the remainder in the following month.
2. Each month’s units of ending inventory are equal to 120% of the next month’s units of sales.
3. The cost of each unit of inventory is P20.00.
4. Selling and administrative expenses are equal to 20% of the current month’s sales.
Actual and projected sales are as follows:
Month In pesos In units
June P708,000 23,600
July 726,000 24,200
August 714,000 23,800
September 684,000 22,800
October 720,000 24,000
November 732,000 24,400
Required (15 items x 5 points):
Prepare cash budgets for August, September, and October, 201A, based on the above data and supported by
the following schedules:
a. Cash receipts from accounts receivable (3 items)
b. Purchases of inventory (3 items)
c. Cash disbursements on accounts payable (3 items)
d. Cash disbursements on selling and administrative expenses (3 items)
e. Cash budget (3 items)

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