Question #2 Cash budgeting is critical to a company’s financial information needs. The following information was extracted from the records of A & B Manufacturing Company Limited. The opening cash balances on January 01, 2021 was expected to be $30,000. The budgeted sales were as follows: Budgeted Sales Month Year $ November 2020 80,000 December 2020 90,000 January 2021 80,000 February 2021 75,000 March 2021 60,000 April 2021 70,000 Analysis of records shows that debtors settle according to the following pattern: 70% within the month of sale 30% the following month Extracts of the purchases budget were as follows: Purchases budget Month Year $ December 2020 65,000 January 2021 50,000 February 2021 75,000 March 2021 70,000 All purchases are on credit and past experience shows that 90% are settled in the month of purchases and the balance settled the month after. Salary is $15,000 per month Overheads of $20,000 per month (including depreciation of $5,000 monthly) are settled monthly. Taxation of $3,500 has to be settled in February and the company will receive an insurance claim of $50,000 in March Required: (a) Prepare a cash collection summary from sales for the first quarter of 2021.
Question #2
Budgeted Sales
Month Year $
November 2020 80,000
December 2020 90,000
January 2021 80,000
February 2021 75,000
March 2021 60,000
April 2021 70,000
Analysis of records shows that debtors settle according to the following pattern:
70% within the month of sale
30% the following month
Extracts of the purchases budget were as follows:
Purchases budget
Month Year $
December 2020 65,000
January 2021 50,000
February 2021 75,000
March 2021 70,000
All purchases are on credit and past experience shows that 90% are settled in the month of purchases and the balance settled the month after.
Salary is $15,000 per month
Required:
(a) Prepare a cash collection summary from sales for the first quarter of 2021.
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