Marie Marx, the management accountant at “Go Jamdown” is in the process of planning the company’s cash needs for the third quarter of 2008. She has received the following information to assist in the preparation of the cash budget for the business. Month Cash Sales Credit Sales Purchases Selling Expenses May $140,000 $500,000 $0 June $160,000 $600,000 $600,000 July $180,000 $700,000 $675,000 $ 75,000 August $156,000 $580,000 $575,000 $105,000 September $160,000 $600,000 $600,000 $ 85,000 The following additional information is also available: i) An analysis of the records show that the collection of accounts receivable are settled, according to the following pattern, in accordance with the credit terms 10/30, n90: o 50% collected in the month of sale o 40% collected in the month following sale o 10% collected two months following sale ii) Eighty percent (80%) of monthly purchases is paid in the month of purchase & the remaining 20% will be paid two months following the purchase. The credit terms of the suppliers is 5/30, n90. iii) During the month of August, a motor vehicle costing $120,000 will be purchased and paid for in cash. At the same time, an old motor vehicle, which has a net book value of $80,000, will be disposed of at a loss of $10,000. iv) Interest on investments in other companies amounting to $65,000 is expected to be collected in August 2008. v) Administrative expenses are expected to be $1,200,000 per annum, and will include depreciation expense of $20,000 per month. vi) Selling expenses and administrative expenses are paid in the month incurred. vii) Taxation of $125,000 has to be settled in September viii) Monthly rental is received from a tenant for factory space leased by Go Jamdown. The rental is $96,000 per annum and is received in the month that it is earned. ix) The cash balance on July 1, 2008 is expected to be an overdraft of $53,000. ACCT 1003_Introduction to Cost and Management Accounting - 2 - Required: (a) Prepare a debtors collection schedule for the quarter July to September. (b) Prepare a schedule of expected cash disbursements for purchases for each of the month July to September. (c) Prepare a cash budget, with a total column, for the quarter ending September 30.
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.
Marie Marx, the management accountant at “Go Jamdown” is in the process of
planning the company’s cash needs for the third quarter of 2008. She has received
the following information to assist in the preparation of the
business.
Month Cash Sales Credit Sales Purchases Selling
Expenses
May $140,000 $500,000 $0
June $160,000 $600,000 $600,000
July $180,000 $700,000 $675,000 $ 75,000
August $156,000 $580,000 $575,000 $105,000
September $160,000 $600,000 $600,000 $ 85,000
The following additional information is also available:
i) An analysis of the records show that the collection of
settled, according to the following pattern, in accordance with the credit
terms 10/30, n90:
o 50% collected in the month of sale
o 40% collected in the month following sale
o 10% collected two months following sale
ii) Eighty percent (80%) of monthly purchases is paid in the month of purchase &
the remaining 20% will be paid two months following the purchase. The credit
terms of the suppliers is 5/30, n90.
iii) During the month of August, a motor vehicle costing $120,000 will be
purchased and paid for in cash. At the same time, an old motor vehicle, which
has a net book value of $80,000, will be disposed of at a loss of $10,000.
iv) Interest on investments in other companies amounting to $65,000 is expected
to be collected in August 2008.
v) Administrative expenses are expected to be $1,200,000 per annum, and will
include
vi) Selling expenses and administrative expenses are paid in the month incurred.
vii)
viii) Monthly rental is received from a tenant for factory space leased by Go
Jamdown. The rental is $96,000 per annum and is received in the month that
it is earned.
ix) The cash balance on July 1, 2008 is expected to be an overdraft of $53,000.
ACCT 1003_Introduction to Cost and
- 2 -
Required:
(a) Prepare a debtors collection schedule for the quarter July to September.
(b) Prepare a schedule of expected cash disbursements for purchases for each of
the month July to September.
(c) Prepare a cash budget, with a total column, for the quarter ending September 30.
(d) Given that the company is required to maintain a minimum cash balance of
$50,000, advise management as to three steps which may be taken to achieve
the desired objective.
Trending now
This is a popular solution!
Step by step
Solved in 6 steps with 8 images
What is the answer for section D, 3 steps that may be taken to mainitain 50000 minimum balance
by Bartleby Expert
