6
3
(a)
Cavalcade Inc. is expected to begi operations on January 1, 2009, sellin
ing a line of
garden equipment. The
with
the
will start operations
Eollowing lawn
and
company
Cash
assets
14 000
Inventory
Equipment
29 000
50 000
Land
31 000
Buildings
200 000
Projected sales for the first four months
of 2009 are
follows:
as
$
140 000
January
February
280 000
325 000
March
April
400 000
wenty per cent of the
company's sales will be for cash and the
remaining 80 per cent
Will be on credit. Seventy-five per cent ofthe receivables
(credit sales) will be collected
in the month
of the sale and 23
per cent in the following month. The
receivables will be deemed
remaining
uncollectible.
Some
expenses
expected to vary with the sales in
are
Cost of goods sold
Bad debts
each month
as
follows:
60% of sales
Variable selling expenses
Variable administration expenses
2% of sales
4% of sales
5% of sales
Sixty per cent of the merchandise
will be paid for in the
month in which the
purchase is made and the balance purchased
will be paid for in the
following month.
Seventy-fiveper cent of the variable expenses willbe paid for in the
were
The
incurred and the balance the
ending inventory
following month.
of each month
should be equal
estimated for cost of sales for the
coming month.
to
The fixed expenses will be
paid for in the month in which
expenses for each month are as follows:
Selling
Wages and salaries
General expenses
comnpany proposes
to
they
are
incurred. These
18 550
Depreciation
March 2009
one-third of the amount
25 000
Administration
The
month in which they
3 125
5 000
6 500
make an additional
investment in equipment of $22 500
handle the inCrease in sales levels.
to
The conpany must maintain a
bank balance each
month of $5 000. The
borrow any additional funds from the
local bank at 5
company Ca
per cent interest per month.
7
(i)
the following scheules for the months
March, 2009.
Prepare
of January, February
and
a)
Cash collections scB.edule
[
5 marks]
b)
Purchases budget
[
4 marks]
c)
Cash disbursement schedule for purchases
3 marks]
d)
Cash disbursement schedule for expenses
4 marks}
Use the information from the schedules at (i) above to prepare a cash budget for
the months of January,
[10 marks]
February and March, 2009.
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