Morgan and Company has planned a cash budget for the third quarter of 2004. The cash balance on July 1, 2004 is expected to be an overdraft of $82,000. Extracts from the sales and purchases budgets are as follows: Month BudgetedSales BudgetedPurchases May $800,000 June $900,000 $600,000 July $750,000 $550,000 August $650,000 $450,000 September $800,000 $500,000 i) All sales are on credit and an analysis of the records shows that debtors settle according to the following pattern, in accordance with the credit terms 5/30, n90: 50% in the month of sale 30% in the month following sale 20% the following month ii) All purchases are on credit and past experience shows that 80% are settled in the month of purchase in order to take advantage of a 10% prompt settlement discount. The balance will be disbursed in the month after purchase. The credit terms of the suppliers - 10/30, n60. iii) Wages and salaries are expected to be $1,800,000 per annum and are paid monthly.
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.
Morgan and Company has planned a
cash balance on July 1, 2004 is expected to be an overdraft of $82,000.
Extracts from the sales and purchases budgets are as follows:
Month BudgetedSales BudgetedPurchases
May $800,000
June $900,000 $600,000
July $750,000 $550,000
August $650,000 $450,000
September $800,000 $500,000
i) All sales are on credit and an analysis of the records shows that debtors settle
according to the following pattern, in accordance with the credit terms 5/30,
n90:
50% in the month of sale
30% in the month following sale
20% the following month
ii) All purchases are on credit and past experience shows that 80% are settled in
the month of purchase in order to take advantage of a 10% prompt settlement
discount. The balance will be disbursed in the month after purchase.
The credit terms of the suppliers - 10/30, n60.
iii) Wages and salaries are expected to be $1,800,000 per annum and are paid
monthly.
![](/static/compass_v2/shared-icons/check-mark.png)
Step by step
Solved in 3 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
![Horngren's Cost Accounting: A Managerial Emphasis…](https://www.bartleby.com/isbn_cover_images/9780134475585/9780134475585_smallCoverImage.gif)
![Intermediate Accounting](https://www.bartleby.com/isbn_cover_images/9781259722660/9781259722660_smallCoverImage.gif)
![Financial and Managerial Accounting](https://www.bartleby.com/isbn_cover_images/9781259726705/9781259726705_smallCoverImage.gif)