Concept explainers
Prepare a

Answer to Problem 3AP
Company B | ||
Cash Budget | ||
For the Month Ended November 30 | ||
Particulars | $ | $ |
Cash balance at beginning of month | 29,600 | |
Add: Receipts | ||
Collections on receivables ( refer Schedule A – Table 2) | 778,800 | |
Sale of fully | 8,400 | 787,200 |
Total cash available | 816,800 | |
Less: Payments | ||
Payments for purchases of merchandise (refer Schedule B – Table 3) | 486,500 | |
Payments on operating expenses (10) | 185,000 | |
Payment on note payable | 98,500 | 770,000 |
Cash balance at end of month | 46,800 |
Table (1)
Therefore, the cash balance at the end of the November is $46,800.
Explanation of Solution
Budget:
Budget is an effective tool to achieve the financial and operational goals of the business. Budget is the key element of the financial planning and it assists managers to control the business cost. Management should set the budgeted amount at reasonable and achievable levels.
Prepare the schedule of cash collections on accounts receivable, and cash payments for purchases of merchandise as follows:
Schedule A:
Schedule A—Collections on Receivables in November | $ |
September sales (1) | 30,800 |
October sales (2) | 132,000 |
November sales (3) | 616,000 |
Total collections on receivables | 778,800 |
Table (2)
Schedule B:
Schedule B—Payments for Purchases of Merchandise | $ |
On October purchases (8) | 217,000 |
On November purchases (9) | 269,500 |
Total payments for purchases of merchandise | 486,500 |
Table (3)
Working note:
Calculate the cash received from the September sales
Calculate the cash received from the October sales
Calculate the cash received from the November sales
Calculate the inventory (units) at the end of the September
Calculate the inventory (units) at the end of the October
Calculate the inventory (units) at the end of the November
Calculate the number of units purchased and cost of purchase for the each months
Particulars |
Units (A) |
Cost of per unit (B) |
Purchases |
Inventory at end of September (4) | 8,000 | ||
Add: Purchases in October | 62,000 | $7 | $434,000 |
Available for sale in October | 70,000 | ||
Less: Sales in October | 60,000 | ||
Inventory at end of October | 10,000 | ||
Add: Purchases in November | 77,000 | $7 | $539,000 |
Available for sale in November | 87,000 | ||
Less: Sales in November (estimated) | 80,000 | ||
Inventory at end of November | 7,000 |
Table (4)
(7)
Calculate the cash paid for the merchandise purchase for the month October
Calculate the cash paid for the merchandise purchase for the month November
Calculate the operating expense under cash budget
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Chapter 23 Solutions
Financial & Managerial Accounting With Connect Plus Access Code: The Basis For Business Decisions
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