Problem - Cash Budget (40 points)

Transformers, Inc. prepared cash estimates for the 3 rd quarter of 2021 (3-months). The
following estimates were developed for certain items:

July August September

Cash sales P 60,000 P 80,000 P 150,000
Credit sales 30,000 60,000 90,000
Purchases 60,000 55,000 75,000
Payroll 40,000 50,000 60,000
Other expenses 20,000 25,000 30,000

In June, credit sales totaled P50,000 and purchases totaled P60,000. May credit sales were
P70,000. Accounts receivable collections amount to 50% in the month after the sale and
40% in the second month after the sale; 10% of the receivables are never collected.
Payroll and other expenses are paid in the month incurred. Sixty percent of the
purchases are paid in the month incurred and the remainder is paid in the following
month. A P20,000 tax payment is due on August 30. The cash balance was P60,000 on
July 1 and the company maintain a minimum cash balance of P50,000. Any deficiency
in cash can be withdrawn from the credit line of the company from the bank at the
beginning of the month cash is required and is paid at the end of the month when
funds are available. Interest rate of the credit line is 12% p.a.

Required:
1. Prepare a cash budget for the 3-month period, July through September. Also add
one column for the total of the quarter balance.
2. What is the balance of accounts receivable and accounts payable as of Sept. 31?