Assuming that the closing cash balance at the end of the first quarter is $450,000, prepare a budgeted schedule of cash receipts and disbursements for Ivory Garments by month, for the second quarter of 2022 (i.e., for the months of April, May and June).

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Ivory Garments, a rapidly expanding garments producer based in Jordan, is in the
process of formulating plans for 2022. The Director of Marketing has completed his
2022 forecast and is confident that sales estimates will be met or exceeded.
The following forecasted sales figures show the growth expected and will provide the
planning basis for other corporate departments.
SALES
SALES
$4,600,000
5,000,000
4,600,000
5,400,000
6,000,000
6,600,000
January
February
July
August
September
October
November
December
$7,000,000
7,000,000
7,400,000
7,400,000
7,000,000
March
April
May
June
7,800,000
The Financial Controller of Ivory Garments has been given the responsibility for
formulating the cash flow projection, a critical element during a period of rapid
expansion. The following information will be used in preparing the cash analysis:
1. Most of the customers of Ivory Garments have a good track record in making
the payments when due. The company collects 20% of its billings in the month
of the sale, 50% in the month after the sale and 30% in the second month after
the sale. Uncollectible accounts are insignificant and should not be considered
in the analysis.
2. The purchase of fabric is Ivory Garments' largest expenditure; the cost of these
items equals 50% of sales. The company receives 60% of the fabrics one
month prior to sale and 40% during the month of sale. Prior experience shows
that accounts payable are paid by Ivory Garments one month after receipt of
the purchased fabrics.
Administrative expenses are projected to be $4,280,000 for 2022. All of these
expenses are incurred uniformly throughout the year except the property taxes
which are paid in four equal instalments in the last month of each quarter. The
composition of administrative expenses is:
Salaries
$ 960,000
Promotion
320,000
480,000
720,000
600,000
1,200,000
$4,280,000
Property taxes
Insurance
Utilities
Depreciation
Total
3.
Transcribed Image Text:Ivory Garments, a rapidly expanding garments producer based in Jordan, is in the process of formulating plans for 2022. The Director of Marketing has completed his 2022 forecast and is confident that sales estimates will be met or exceeded. The following forecasted sales figures show the growth expected and will provide the planning basis for other corporate departments. SALES SALES $4,600,000 5,000,000 4,600,000 5,400,000 6,000,000 6,600,000 January February July August September October November December $7,000,000 7,000,000 7,400,000 7,400,000 7,000,000 March April May June 7,800,000 The Financial Controller of Ivory Garments has been given the responsibility for formulating the cash flow projection, a critical element during a period of rapid expansion. The following information will be used in preparing the cash analysis: 1. Most of the customers of Ivory Garments have a good track record in making the payments when due. The company collects 20% of its billings in the month of the sale, 50% in the month after the sale and 30% in the second month after the sale. Uncollectible accounts are insignificant and should not be considered in the analysis. 2. The purchase of fabric is Ivory Garments' largest expenditure; the cost of these items equals 50% of sales. The company receives 60% of the fabrics one month prior to sale and 40% during the month of sale. Prior experience shows that accounts payable are paid by Ivory Garments one month after receipt of the purchased fabrics. Administrative expenses are projected to be $4,280,000 for 2022. All of these expenses are incurred uniformly throughout the year except the property taxes which are paid in four equal instalments in the last month of each quarter. The composition of administrative expenses is: Salaries $ 960,000 Promotion 320,000 480,000 720,000 600,000 1,200,000 $4,280,000 Property taxes Insurance Utilities Depreciation Total 3.
4.
Income tax payments are made by Ivory Garments in the first month of each
quarter based on income for the prior quarter. Ivory's income tax rate is 30%.
Ivory's net income for the first quarter of 2022 is projected to be $1,350,000.
5.
Ivory Garments uses a calendar year reporting period.
Required:
a) Assuming that the closing cash balance at the end of the first quarter is
$450,000, prepare a budgeted schedule of cash receipts and disbursements for
Ivory Garments by month, for the second quarter of 2022 (i.e., for the months of
April, May and June).
Transcribed Image Text:4. Income tax payments are made by Ivory Garments in the first month of each quarter based on income for the prior quarter. Ivory's income tax rate is 30%. Ivory's net income for the first quarter of 2022 is projected to be $1,350,000. 5. Ivory Garments uses a calendar year reporting period. Required: a) Assuming that the closing cash balance at the end of the first quarter is $450,000, prepare a budgeted schedule of cash receipts and disbursements for Ivory Garments by month, for the second quarter of 2022 (i.e., for the months of April, May and June).
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