17 Cash receipts, disbursements and summary budgets LO5 Hailey\'s Hats manufactu

Question

17 Cash receipts, disbursements and summary budgets LO5 Hailey's Hats manufactures and distributes hats for every imaginable occasion. Henrietta Hailey started the company in her house three years ago and has been surprised at her success. She is considering an expansion of her business and needs to prepare cash budgeting information for presentation to Second National Bank to secure a loan. Henrietta is not an accountant, so she has asked you to help her with preparing the necessary reports Hailey's Hats began the month with a bank balance of $10000 The budgeted sales for March to June are as follows: March April $14000 $16500 $15500 $17500 May June Cash sales Sales on account Total sales 29000 3000040000 50000 $43000 $46500 $55500 $67 500

Explanation / Answer

Cash receipts budget April May June Cash sales (a) 16500 15500 17500 Credit sales 30000 40000 50000 70% collected in the month of sale (b) 21000 28000 35000 30% collected in the following month © 8700 9000 12000 (29000*30%) (30000*30%) (40000*30%) (Beginning Accounts Receivable) Total cash receipts (a)+(b)+© 46200 52500 64500 Cash disbursement budget April May June Sales 46500 55500 67500 Purchase-60% of sales 27900 33300 40500 Paid for it in the follwing month (a) 25800 19980 24300 (43000*60%) (March month) Selling and admin exp-30% of sales 13950 16650 20250 Less: Depreciation @ 50% 6975 8325 10125 Cash paid for selling and admin exp (b) 6975 8325 10125 Purchase of equipment © 24000 Dividend paid (d) 12500 Total cash disbursements (a)+(b)+©+(d) 69275 28305 34425 Cash Budget April May June Beginning cash balance 10000 10000 11120 Add: Total cash receipts 46200 52500 64500 Total cash available (A) 56200 62500 75620 Cash payments for: Purchases 25800 19980 24300 Selling and admin expense 6975 8325 10125 Additional equipment 24000 Dividend 12500 Total cash payments (B) 69275 28305 34425 Preliminary cash balance (A)-(B) -13075 34195 41195 Additional loan/(Loan repayment) 23075 -23075 0 Ending cash balance 10000 11120 41195 Loan balance April May June Beginning of month 0 23075 0 Additional loan/(Loan repayment) 23075 -23075 0 (13075+10000) End of month 23075 0 0

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