You are an accountant for Graham Ltd, a manufacturing company of soft drinks. Yo

Question

You are an accountant for Graham Ltd, a manufacturing company of soft drinks. You are provided the following information to prepare monthly cash budgets for the two months of March 465,000 March and April 2017 April Sales (soft drinks) 525,000 275,000 ra w material 221,000 hases 90,000 45,000 Direct labour Manufacturing (Net of depreciation expenses Marketing administration ex Proceeds from cash sale of old machineries Cash payment for new machi Repay loan 110,000 52,000 overhead and 70,000 75,000 14,500 26,500 80,000 Additional information All sales of soft drinks are on credit. 2. To minimise bad debts, the company has a proven sales credit policy as follows: (i) (ii) (iii) Collect 70% of sales in the month of sale Collect 20% of sales in the following month Collect 10 % of sales in the second month following the sale Sales in January and February 2017 were $315,000 and $400,000 respectively The company pays 100% of direct raw material purchases in the following month of purchase 5. The company purchases raw materials of $185,000 in February 2017 6. The cash balance at 28th February 2017 was $ 60,000 Required (a) Prepare a schedule of receipts from debtors for the months ending 31t March and 30h April 2017 (6 Marks) (b) Prepare cash budget for March and April 2017

Explanation / Answer

(a)

Working:

(b)

Schedule of receipts from debtors March April Total Sales 465000 525000 990000 Receipts: for January Sales 31500 31500 for February Sales 80000 40000 120000 for March Sales 325500 93000 418500 For April sales 367500 367500 Total Collections 437000 500500 937500

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