Northern Swit is famous in making ice cream. One unique flavor of ice cream produced by Northern Swits is Black Raspberry Crunch. Assume that Northern Swits prepares monthly cash budget. The following information is provided by their accountant Kritesh for the year 2016: August (2016) $ September (2016) $ Sales 460,000 412,000 Direct material purchased 185,000 210,000 Direct Labour 70,000 85,000 Manufacturing overhead 50,000 65,000 Selling and administrative expenses 85,000 95,000 Collections are expected to be 75% in the month of sale, and 25% in the month following sale. Northern Swits pays 60% of the direct materials purchases in cash in the month of purchase, and the balance due in the month following the purchase. All other items are paid in the month incurred. Other information: Sales July 2016: $380,000 Purchase of direct materials: July 2016: $175,000 Other receipts: August – Donation received $2,000 September – sale of used equipment $4,000 Other disbursement: September- Purchased equipment 4,000 Repaid debt: August $30,000 Required: Prepare the schedules of expected cash collection of Northern Swits from customers for August and September. Prepare the schedules of expected cash payment of Northern Swits for August and September .

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Northern Swit is famous in making ice cream. One unique flavor of ice cream produced by Northern Swits is Black Raspberry Crunch. Assume that Northern Swits prepares monthly cash budget. The following information is provided by their accountant Kritesh for the year 2016:

	August (2016) $	September (2016) $
Sales	460,000	412,000
Direct material purchased	185,000	210,000
Direct Labour	70,000	85,000
Manufacturing overhead	50,000	65,000
Selling and administrative expenses	85,000	95,000

Collections are expected to be 75% in the month of sale, and 25% in the month following sale. Northern Swits pays 60% of the direct materials purchases in cash in the month of purchase, and the balance due in the month following the purchase. All other items are paid in the month incurred.

Other information:

Sales July 2016: $380,000

Purchase of direct materials: July 2016: $175,000

Other receipts: August – Donation received $2,000

September – sale of used equipment $4,000

Other disbursement: September- Purchased equipment 4,000

Repaid debt: August $30,000

Required:

Prepare the schedules of expected cash collection of Northern Swits from customers for August and September.
Prepare the schedules of expected cash payment of Northern Swits for August and September .

Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.

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