At the end of September 2005, Burgess Ltd. Had a bank balance of $275,000. Cash budgeting is critical to the company’s financial information needs. The following information was extracted from the company’s records: 1. The table below provides information on budgeted sales for the periods indicated: Budgeted Sales 2005 $ January 2,400,000 February 1,500,000 March 2,800,000 April 1,900,000 May 3,000,000 June 2,500,000 July 2,700,000 August 2,000,000 September 3,400,000 October 1,200,000 November 1,500,000 December 3,600,000 The company’s records indicated that 50% of the company’s sales were for cash; and 50% was received one month after sale. 2. Taxation for the last quarter of 2005 amounting to $1,000,000 was due in the last month of the last quarter. 3. In October 2005, the company bought a motor truck for $1,500,000. The agreement with the supplier was that a down-payment of $800,000 would be made in the first month of the last quarter in 2005 and the balance paid off in equal amounts during the last two months of the last quarter in 2005. 4. The company is to receive insurance claim of $3,000,000 for damage done to its warehouse during heavy rains. The amount is to be disbursed as follows: $2,500,000 in September 2005; $250,000 in October 2005; and the balance in November 2005. 5. Investments held at bank of China will mature in December 2005. The amount to be collected is expected to be $4,000,000. The company planned to pay dividends to, its shareholders amounting to $500,000 in January 2006. It also, planned to pay $1,600,000 in November 2005 for a plot of land to build a new warehouse. 6. In October 2005 the company sold a motor vehicle for $950,000 to one of its staff members while $400,000 written off as bad debt in 2003 was recovered in the second month of the last quarter in 2005. Rental income amounting to $1,560,000 per annum is budgeted for 2005. 7. Operating expenses amounted to $2,400,000 is budgeted for 2005. Included in this figure is monthly depreciation of $100,000. 8. Salesmen are paid commission based on the amounts collected from sales each month. The amount is 5% of sales collection each month. Miscellaneous expenses amounting to $144,000 monthly was not included in the operating expenses budget. 9. Records from the company’s books revealed that 70% of purchases are for cash; 15% is paid for one month later; and the balance one month later. The following table provides information on budgeted purchases for the periods indicated: Budgeted Purchases 2005 $ January 1,000,000 February 1,200,000 March 2,000,000 April 1,400,000 May 2,200,000 June 1,600,000 July 1,500,000 August 2,400,000 September 2,600,000 October 1,100,000 November 2,700,000 December 1,600,000 Required: A cash budget for October - December of 2005. Clearly show amounts for cash sales, credit sales, cash purchases, credit purchases and totals.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
At the end of September 2005, Burgess Ltd. Had a bank balance of $275,000. Cash budgeting is
critical to the company’s financial information needs. The following information was extracted
from the company’s records:
1. The table below provides information on budgeted sales for the periods indicated:
Budgeted Sales
2005 $
January 2,400,000
February 1,500,000
March 2,800,000
April 1,900,000
May 3,000,000
June 2,500,000
July 2,700,000
August 2,000,000
September 3,400,000
October 1,200,000
November 1,500,000
December 3,600,000
The company’s records indicated that 50% of the company’s sales were for cash; and 50% was
received one month after sale.
2.
the last quarter.
3. In October 2005, the company bought a motor truck for $1,500,000. The agreement with the
supplier was that a down-payment of $800,000 would be made in the first month of the last
quarter in 2005 and the balance paid off in equal amounts during the last two months of the
last quarter in 2005.
4. The company is to receive insurance claim of $3,000,000 for damage done to its warehouse
during heavy rains. The amount is to be disbursed as follows: $2,500,000 in September 2005;
$250,000 in October 2005; and the balance in November 2005.
5. Investments held at bank of China will mature in December 2005. The amount to be
collected is expected to be $4,000,000. The company planned to pay dividends to, its
shareholders amounting to $500,000 in January 2006. It also, planned to pay $1,600,000 in
November 2005 for a plot of land to build a new warehouse.
6. In October 2005 the company sold a motor vehicle for $950,000 to one of its staff members
while $400,000 written off as
last quarter in 2005. Rental income amounting to $1,560,000 per annum is budgeted for
2005.
7. Operating expenses amounted to $2,400,000 is budgeted for 2005. Included in this figure is
monthly
8. Salesmen are paid commission based on the amounts collected from sales each month. The
amount is 5% of sales collection each month. Miscellaneous expenses amounting to
$144,000 monthly was not included in the operating expenses budget.
9. Records from the company’s books revealed that 70% of purchases are for cash; 15% is paid
for one month later; and the balance one month later. The following table provides
information on budgeted purchases for the periods indicated:
Budgeted Purchases
2005 $
January 1,000,000
February 1,200,000
March 2,000,000
April 1,400,000
May 2,200,000
June 1,600,000
July 1,500,000
August 2,400,000
September 2,600,000
October 1,100,000
November 2,700,000
December 1,600,000
Required:
A
credit sales, cash purchases, credit purchases and totals.
Step by step
Solved in 4 steps with 1 images
