ACCT2105 Introductory Accounting

Semester 3 2010

CHAPTER 9: BUDGETING
EXERCISES

QUESTION 1

Sales: July $13,000; August $12,000; September $15,000.

 25% of sales are cash sales, the remaining 75% are credit sales collected as follows:
 20% in the month of sale;
 60% in the month after sale;
 18% 2 months after sale;
 2% lost in bad debts.
 Sales in the months of May and June were $12,000 and $10,000 respectively.
Collection follows the same pattern as above.

Required:
Prepare the Schedule of Cash Receipts from Debtors from July to September.

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ACCT2105 Introductory Accounting
Semester 3 2010

QUESTION 2

From the following data from Ole’ Services, complete the receipts from debtors schedule for
the three months ending 30 June 2006.

Actual Estimated
February March April May June

Credit Sales $134,000 $126,000 $108,000 $110,000 $128,000

Credit sales are normally settled according to the following pattern:

40% in the month of sale
30% in the month following the sale
25% in the second month following the sale
5% of accounts are never collected

Required:
Prepare a schedule of receipts from debtors.

ANSWERS:
Schedule of Receipts from Debtors
Collections
Sales: $ April May June Bad
Debts
February

March

April

May

June

TOTAL

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ACCT2105 Introductory Accounting
Semester 3 2010

QUESTION 3

From the following data for SeSe Services, complete a receipt from debtors schedule for the
three (3) months (June, July, August 2009):

Actual Estimated
April May June July August
Credit sales $68,000 $76,000 $86,000 $64,000 $65,000

Credit sales are normally settled according to the following pattern: 60% in the month
following the sale, 35% in the second month. 5% never settled.

Required:
Prepare the Schedule of Cash Receipts from Debtors.

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ACCT2105 Introductory Accounting
Semester 3 2010

QUESTION 4

Ainsworth Enterprises has provided the following estimates relating to the first
quarter of 2006:

Cash Sales $46,000

Credit Sales $92,400
Receipts from Debtors $71,500
Wages $54,000
Office Furniture $12,600
Utilities Expense $3,800
Administrative Expense $14,100
Depreciation of office equipment $315
Receipt of Loan $15,000
Credit purchases $65,600
Payments to creditors $52,900

The cash balance at 1 January 2006 was $11,250.

Required:
Prepare a Cash Budget for the quarter ending 31 March 2006.

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ACCT2105 Introductory Accounting
Semester 3 2010

QUESTION 5

Use the following information to prepare the July cash budget for Acco Co. It should show
expected cash receipts and cash disbursements for the month and the cash balance expected
on July 31.

(a) Beginning cash balance on July 1: $50,000.

(b) Cash receipts from sales: 30% is collected in the month of sale, 50% in the next month,
and 20% in the second month after sale (uncollectible accounts are negligible and can
be ignored). Sales amounts are: May (actual), $1,720,000; June (actual), $1,200,000;
and July (budgeted), $1,400,000.
(c) Payments on merchandise purchases: 60% in the month of purchase and 40% in the
month following purchase. Purchases amounts are: June (actual), $700,000; and July
(budgeted), $750,000.
(d) Budgeted cash disbursements for salaries in July: $275,000.
(e) Budgeted depreciation expense for July: $36,000.
(f) Other cash expenses budgeted for July: $200,000.
(g) Accrued income taxes due in July: $80,000.
(h) Bank loan interest due in July: $6,600.

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ACCT2105 Introductory Accounting
Semester 3 2010

QUESTION 6

Saigon Tech has presented the following estimates relating to 2006 activities of the business:

Quarter ending Quarter ending Quarter ending Quarter ending

March 31 ($) June 30 ($) September 30 31 December ($)
($)
Sales revenue 600,000 700,000 800,000 850,000
Purchases 385,000 410,000 390,000 420,000
Cost of sales 300,000 350,000 400,000 425,000
Marketing and 150,000 150,000 150,000 150,000
Administration
Expenses
Occupancy 68,000 68,000 68,000 68,000
Expenses
Depreciation 12,500 12,500 12,500 12,500
expenses

 Sales in the December quarter 2005 were $500,000. All sales are on credit, of which
70% are collected in the quarter of sale and 30% in the following quarter.
 Purchases are on credit, and the entity’s policy is that all the purchases are paid for in
the same quarter.
 The marketing and administration expenses incurred and paid are the same
 Occupancy expenses incurred and paid are the same.
 There is a major IT hardware acquisition of $25,400 to be paid in cash and is
expected in the December quarter.
 The bank balance at 31 December 2005 was $18,260.

Required:
(1) Prepare a Schedule of Receipts from Debtors showing cash collections for each
quarter of 2006.
(2) Prepare a cash budget (on a quarterly basis) for the year ending 31 December
2006.

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ACCT2105 Introductory Accounting
Semester 3 2010

QUESTION 7

During the last week of August, Oneida Company's owner approaches the bank for a
$100,000 loan to be made on September 2 and repaid on November 30 with annual interest of
12%, for an interest cost of $3,000.

The owner plans to increase the store's inventory by $80,000 during September and needs the
loan to pay for inventory acquisitions. The bank's loan officer needs more information about
Oneida's ability to repay the loan and asks the owner to forecast the store's November 30 cash
position.

On September 1, Oneida is expected to have a $5,000 cash balance, $148,000 of accounts

receivable, and $125,000 of accounts payable. Its budgeted sales, merchandise purchases, and
various cash disbursements for the next three months follow:

The budgeted September merchandise purchases include the inventory increase. All sales are
on account. The company predicts that 25% of credit sales is collected in the month of the
sale, 45% in the month following the sale, 20% in the second month, 9% in the third, and the
remainder is uncollectible. Applying these percentages to the August credit sales, for
example, shows that $96,750 of the $215,000 will be collected in September, $43,000 in
October, and $19,350 in November.

All merchandise is purchased on credit; 80% of the balance is paid in the month following a
purchase, and the remaining 20% is paid in the second month. For example, of the $125,000
August purchases, $100,000 will be paid in September and $25,000 in October.

Required:
Prepare a cash budget for September, October, and November for Oneida
Company. Show supporting calculations as needed.