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Months sales purchases
april(actual) 640000 210000
May(actual) 600000 240000
June(forecast) 550000 240000
July(forecast) 550000 360000
Aug.(forecast) 580000 4000000
Sept.(forecast) 660000 340000Assumptions:
Company makes 10% of its sales on cash and 90% on credit.the credit sales,20% are collected ìn the month after the sales and 80% are collected two months after. The company pays 40% of its purchases in the month after purchases and 60% two months after.
Direct labor cost equals 10% of the purchases month.overhead expense equals 24000 per month. Interest payment of 60000 are due in june and sept. A depreciation cost of 20000 per month is allocated.the bad debts are assume to be 10% of sales uncollectible. A cash dividends of 100000 is schedule to be paid july.taxes is 5% of sales are due every month.there is a schedule capita outly of 200000 for july and sept.
the company ending cash balance for may is 40000. The minimum desired balance is 30000. Preparea schedule of monthly cash receipts, monthly cash payments and complete monthly cash budget with borrowing and repayment for june-sept. The maximum desired cash balance is 100000.excess cash (above 100000) is used to buy trading and securities. Trading securities are sold prior to borrowing funds in case of a cash short fall (less than 30000):*
@sitti23 said:
Months sales purchases
april(actual) 640000 210000
May(actual) 600000 240000
June(forecast) 550000 240000
July(forecast) 550000 360000
Aug.(forecast) 580000 4000000
Sept.(forecast) 660000 340000Assumptions:
Company makes 10% of its sales on cash and 90% on credit.the credit sales,20% are collected ìn the month after the sales and 80% are collected two months after. The company pays 40% of its purchases in the month after purchases and 60% two months after.
Direct labor cost equals 10% of the purchases month.overhead expense equals 24000 per month. Interest payment of 60000 are due in june and sept. A depreciation cost of 20000 per month is allocated.the bad debts are assume to be 10% of sales uncollectible. A cash dividends of 100000 is schedule to be paid july.taxes is 5% of sales are due every month.there is a schedule capita outly of 200000 for july and sept.
the company ending cash balance for may is 40000. The minimum desired balance is 30000. Preparea schedule of monthly cash receipts, monthly cash payments and complete monthly cash budget with borrowing and repayment for june-sept. The maximum desired cash balance is 100000.excess cash (above 100000) is used to buy trading and securities. Trading securities are sold prior to borrowing funds in case of a cash short fall (less than 30000):*
You need to calculate the cash receipts and cash payment for each of the 4 months from June to September.
Receipts from cash sales are no problem – 10% of the forecast sales in each month.
Receipts from credit sales take a little longer. For example, in June you will receive 80% of the credit sales in April (because they take 2 months to pay) and 20% of the credit sales in May (because they take 1 month to pay). Because of the bad debts, you will have to take the credit sales each month as being 90% of total sales, less 10%.Payment for labour is no problem – 10% of the purchases each month
Overheads are no problem – 24,000 a month.
Depreciation is not relevant because it does not involve cash.
Dividends, interest payments, and capital outlay are as per the question.
Tax on sales is 5% of the sales each month.I don’t know where you got this question from, but although each little part of it can be asked in paper F3, you cannot be asked the whole thing.
Also, it must be old because the terminology is out-of-date – bad debts are now called irrecoverable debts.
Finally, the wording about the irrecoverable debts is very poor indeed – I have written earlier the only way you can deal with them, but it is a very poor question indeed.
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