QUESTION 3- Cash Budgets Jamieson Ltd is preparing to set up business on 1/7/2022 and has made the following forecast for the first six months of trading: July August Sept Oct Nov Dec Total Sales $525,000 588,000 616,000 630,000 658,000 672,000 3,689,000 Purchases $300,000 336,000 352,000 360,000 376,000 384,000 2,108,000 The expected selling price is $70 per unit. The cash collection pattern from debtors is expected to be: Cash customers - 30% of sales revenue will be for immediate cash and cash discount of 5% will be allowed. Credit customers - 70% of sales revenue will be from credit customers. These creditors will pay their bills 50% in month after sale and the remainder in the second month after sale. The purchases will be paid for 50% in month after purchase when 2% cash discount will be received. The remaining purchases will be paid for in the second month after purchase. Expected costs: Wages $45,000 per month payable as incurred. Variable overheads $10 per unit payable as incurred. Fixed overheads (including depreciation) $52,000 per month payable as incurred. Equipment will be purchased in July costing $48,000 which will have a useful life of 5 years. To finance this purchase a loan of $50,000 will be secured at the rate of 10% per annum. Interest to be paid monthly, but capital loan repayments will not commence until January 2023. You are required to: Prepare a schedule of budgeted cash collections for sales for each of the months July to December, 2022. (a) Prepare a schedule of budgeted cash disbursements for purchases for each of the months July to December, 2022 Prepare a cash budget for six months July to December 2022.
QUESTION 3- Cash Budgets
Jamieson Ltd is preparing to set up business on 1/7/2022 and has made the following
|
|
July |
August |
Sept |
Oct |
Nov |
Dec |
Total |
|
Sales |
$525,000 |
588,000 |
616,000 |
630,000 |
658,000 |
672,000 |
3,689,000 |
|
Purchases |
$300,000 |
336,000 |
352,000 |
360,000 |
376,000 |
384,000 |
2,108,000 |
The expected selling price is $70 per unit.
The cash collection pattern from debtors is expected to be:
Cash customers - 30% of sales revenue will be for immediate cash and cash discount of 5% will be allowed.
Credit customers - 70% of sales revenue will be from credit customers. These creditors will pay
their bills 50% in month after sale and the remainder in the second month after sale.
The purchases will be paid for 50% in month after purchase when 2% cash discount will be received. The remaining purchases will be paid for in the second month after purchase.
Expected costs: Wages $45,000 per month payable as incurred.
Variable
Fixed overheads (including
Equipment will be purchased in July costing $48,000 which will have a useful life of 5 years. To finance this purchase a loan of $50,000 will be secured at the rate of 10% per annum. Interest to be paid monthly, but capital loan repayments will not commence until January 2023.
You are required to:
- Prepare a schedule of budgeted cash collections for sales for each of the months July to December, 2022.
- (a) Prepare a schedule of budgeted cash disbursements for purchases for each of the months July to December, 2022
- Prepare a
cash budget for six months July to December 2022.
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