Ken Martin, manager of Lonnie Car Repairers, has requested that you prepare a cash budget for the months of December and January. He has provided the following information to assist in this task.

• Projected cash balance at the end of November is $30 000.

• Actual revenue for October and November and projected revenue for December and January are as follows.

• Analysis of past records has shown that credit sales are collected over a three-month period, with 50 per cent being collected in the month of the sale, 40 per cent in the next month, and the remainder in the following month.

• Projected expenditure during December and January is as follows:

– Selling and administrative expenses are budgeted to be $58 000 each month.

– A new car-hoist will be purchased for $100 000, with a $20 000 cash payment in December and the balance to be paid in March.
– Ken wants to maintain a minimum cash balance of $30 000.
– As more customers will want their vehicles serviced prior to Christmas, the consumables store will need more supplies. Accordingly, an order has been placed for $45 000 of inventory. This will arrive in late November and be paid for in December.

Required

(a) Prepare a schedule showing receipts from customers for the credit sales.

(b) Prepare a cash budget for December and January.

(c) Prepare a report for Ken outlining his cash position over the Christmas period. Give advice regarding any financing requirements or investment opportunities.

Transcribed Image Text:

October November December January Cash sales $33 000 $ 31 000 $ 42 000 $30 000 Sales on credit 60 000 80 000 100 000 50 000 Total sales $ 93 000 $111 000 $142 000 $80 000