Reference no: EM132844382
Green Friends Ltd is a garden design and landscaping business that started operations on 1 September 2020. The following information has been provided by the firm.In September, cash sales were $15,000 and credit sales $35,000. Total expected sales in the following three months are: $64,000 in October; $82,000 in November; and $96,000 in December. The company expects 25% of the sales of each month to be cash sales and the remainder credit sales. Credit sales are expected to be collected 60% in the month of the sale, 30% in the next month, and 10% in the following month.
- All purchases of inventory are on credit. Purchases of inventory in September were $35,000. The company estimates purchases in the following three months to be: $30,000 in October, $35,000 in November and $40,000 in December. Purchases are paid 40% in the month of purchase, and 60% in the following month.
- Wages expense is estimated to be $12,000 in October, $16,000 in November and $20,000 in December, paid in cash.
- Other operating expenses are budgeted to be $18,000 in October, $22,000 in November and $24,000 in December, paid in cash.
- Depreciation expenses of $1,400 per month are expected.
- The cost of sales is estimated as 40% of sales revenue each month.
- Dividends of $10,000 are budgeted to be paid in December.
- Proceeds from a bank loan to be received in October: $40,000
- The cash balance at 1st October 2020 was $6,000
Problem 1. Make a Budgeted Income Statement for the period October - December 2020.
Problem 2. Make a schedule of estimated receipts from debtors (accounts receivable) for the months of October, November and December 2020.
Problem 3. what is the amount of accounts receivable at 31st December 2020?
Problem 4. Make a cash budget for October, November and December 2020
Problem 5. what is the amount of accounts payable at 31st December 2020?
Problem 6. Is there anything you would do to improve the cash budget?
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