Rebecca has provided you with the following information to assist in the preparation of a Cash Budget
Question:
Rebecca has provided you with the following information to assist in the preparation of a Cash Budget for the month of July 2023. In addition, she advises also that her business Bake It with Beck has been awarded a one-year contract to provide cookies, cakes and pastries for The Fusion and
Little Bang cafes at Deakin University. She has some funds in the business' retained earnings amounting to $50,000.
i) All sales are on a credit basis and are collected as follows: -
60% of sales are collected in the month of the sales.
40% of sales are collected in the month following the sales.
ii) All purchases are on a credit basis and are settled as follows: -
50% of purchases are settled in the month of the purchases
50% of purchases are settled in the month following the purchases.
Budgeted Sales ($) | Budgeted Purchases ($) | |
may | 100,000 | 52,500 |
june | 120,000 | 64,000 |
july | 110,000 | 68,000 |
iii) The business plans to take out a small business loan of $50,000 at the end of July 2023 From Southpac Bank and will be repaying it back in June 2026.
It is a 3 year term loan at a variable rate of 6.24% p.a
iv) Selling and administrative expenses each month are $40,000.
v) The selling and administrative expenses include monthly depreciation expense of $6,000.
vi) Sales commission is 15% of the total monthly sales and paid to the staff at the end of every month.
vii) Kitchen Equipment costing $35,000 is expected to be bought in July and paid in full next June with cash.
viii) Rebecca withdraws $5,000 every month.
South-Western Federal Taxation 2020 Comprehensive
ISBN: 9780357109144
43rd Edition
Authors: David M. Maloney, William A. Raabe, James C. Young, Annette Nellen, William H. Hoffman