cash budget

Question 1

John Matthew is president of Woodhull Nurseries, Inc. This corporation has four locations and has been in business for six years. Each retail outlet offers over 300 varieties of plants and trees. Sam, the controller, has been asked to do cash budget for the Southern Division for the first quarter of 2016.

Projected data supporting the budget are summarized below. Collection history for the accounts receivable has shown that 30 percent of all credit sales are collected in the month of sale, 60 percent in the month following the sale, and 8 percent in the second month following the sale. Two percent of the credit sales are uncollectable. Purchases are all paid for in the month following the purchase. As of December 31, 2015, the Southern Division had a cash balance of $9,600.

Sales (60 percent on credit)

Purchases

November 2015

$160,000

December 2015

$86,800

December 2015

200,000

January 2016

124,700

January 2016

120,000

February

99,440

February

160,000

March

104,800

March

140,000

Salaries and wages are projected to be $25,200; $33,200 in February; and $21,200 in March. Monthly costs are estimated to be: utilities, $4,220; collection fees, $1,700; rent, $5,300; equipment depreciation, $5,440; supplies $2,480; small tools, $3,140; and miscellaneous expenses, $1,900.

Required to prepare:

(A) Collection Schedule

(B) Payment Schedule

(C) Cash budget for John Matthew by month for the Southern Division for the first quarter of March 2016.