Exercise 11.

12

Budgeted cash receipts from sales

Kay’s Hardware Ltd’s budgeted monthly sales for January to June 2022 are given below.
About 70% of the monthly sales are expected to be on credit. Approximately 60% of the
credit sales are collected in the month of sale, 30% in the month following the sale, and 5%
in the second month following the sale; 5% are never collected and are written off.

The budgeted gross sales by month are as follows.

Required
a. Prepare a schedule of expected cash receipts from sales for April, May and June
2022.
(KAY’S HARDWARE LTD
Budgeted Cash Receipts from Sales
April May June
From cash sales in same month 18750 22500 19500
[30% × current month]

From credit sales same month

[70% × current month × 60%) 26250 31500 27300
70% *43750(70% of og) *60%
From preceding month’s sales
[70% × 30% × preceding month] 14595 13125 15750
69500*70%=48650*30%
From second preceding month] 2835 2,433 2,188
[70% × 5% × second preceding month]
81000*70%=56700*5%
62430 69558 64738
Exercise 11.13 Budgeted cash payments for purchases
The accountant for Schulz Ltd compiled the following figures in order to estimate budgeted
cash payments for March and April 2022.

Schulz Ltd uses the following assumptions when preparing budgets. The cost of sales is
60% of sales. The company pays for 60% of its purchases in the month after purchase,
30% in the second month, following the purchase and 10% in the third month following
the purchase. No discounts are received. It is business policy to maintain a month-end
inventory balance sufficient to meet the projected sales requirement for the following
month.

Required
a. Calculate the budgeted purchases for March and April 2022. Ignore GST.
SCHULZ LTD
Budgeted Purchases — March–April 2022
March April
Required ending 66900 79500
inventory111500*60%
Cost of sales /124200*60% 74520 66900
Less beginning inventory 65700 66900
Required purchases 75720 79500
66900+74520-75720

b) Prepare a schedule of expected cash payments for purchases for March and April 2022.
SCHULZ LTD
Expected Cash Payments for Purchases — March–April 2022
March April
60% – previous month 47610 75720*60%=45432
30% – second preceding month 22350 79350*30%=23805
10% – third preceding month 7800 74500*10%=7450
Cash payments 77760 76687