Cash Forecasting Comprehensive Problem

Cash Forecasting Comprehensive Problem

TM Company has just prepared its master budget for the year 2015. Some of the information used in the preparation of such budget is as follows:

Twenty percent (20%) of total sales is cash sales. The collections pattern for the sales on credit is as follows:

        30% in the month of sale

40% in the month after the month of sale

25% in the second month after the month of sale

• TM Company’s gross margin rate is 60% of sales.
• Accounts payable arising from merchandise purchases is paid for in the month following the purchase
• The Company desires an inventory at the end of each month equal to 30% of the next month’s sales in units.
• The variable operating expenses (other than cost of goods sold) are 10% of sales and are paid for in the month following the sale.
• The annual fixed operating expenses are as follows:

• All of the fixed operating expenses are incurred uniformly throughout the year. Cash fixed operating expenses are paid in the month of incurrence, except for:

• Insurance – paid quarterly in January, April, and July
• Property taxes – paid twice a year in April and October

Instructions:

1. Prepare the budgeted cash collections for the months of January to June 2015.
2. Prepare budgeted purchases of merchandise for January to May 2015.
3. Prepare the budgeted cash disbursement for operating expenses (other than the cost of goods sold) for the months of January to June 2015.
4. Prepare the budgeted cash disbursement to be made in the months of January to June 2015 for merchandise purchases
5. Assume that the cash balance at the beginning of January 2015 is Php 51,600, determine the cash balance end for the months of January to June 2015.