Reference no: EM132802201
Problem - Forecasted details for All Spice Groceries for the quarter ending 31 March 2020 are as follows:
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January
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February
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March
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Sales
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$450,000
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$400,000
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$500,000
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Purchases
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$140,000
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$280,000
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$300,000
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It is expected that 20% of Sales are for cash and 80% are credit sales. It is expected that credit sales will be collected in the following pattern:-
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70%
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1 month after the sale
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30%
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2 months after the sale
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Additional Information:-
All purchases are payable in the same month of purchase.
Stock at the end is expected to be for January $10,000, February $12,000 and March $14,000.
Selling Expenses are $40,000 per month. Depreciation of Delivery Van is $3,000 per month. This amount has been included in the Selling Expenses.
Management is installing a new computer system in January at a cost of $10,000. A deposit of 25% is required in January and the balance to be paid in February.
Cash proceeds of $30,000 from investments are expected in February.
Payment for new office equipment of $15,000 is to be paid in February.
The bank balance as at 1 January is $14,000.
Required -
[1] Write a Cash Collections Budget for January, February and March.
[2] Write a Cash Budget for January, February and March. Show each month in a separate column.
[3] From your results, do you consider All Spice Groceries to be in a strong financial position? Briefly explain.
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