Kevin Limited owns a retail store that sells new and used sporting equipment. Recently the managing director Kevin is concerned about the cash flow situation of the company. He has asked his management accountant to prepare cash budget in order to look at future cash requirements for the company. Kevin provides the following information.

1.           Kevin Limited has a sales budget for March of $440,000.  About 10% are cash sales and the remainder is sold on account. 

2.           The company expects that 60% of credit sales will be collected in the month of the sale, 25% in the next month and 10% in the following month. 

3.           Materials purchased on account are expected to be $250,000.  Kevin pays 35% in the month of the purchase, 50% in the month following the purchase and the remaining 15% in the second month after the purchase. 

4.           Salaries and wages of the workers are approximately $45,000 per month.  The employees are paid weekly so on average 95% of their wages are paid in the month to which they relate and the remaining 5% is paid in the following month. 

5.           Utilities average $4,300 per month. 

6.           Rent on the building is $9,000 per month. 

7.           Insurance is $3,000 per month and advertising costs are $1,000 per month. 

8.           February sales were $320,000 and purchases of materials in February were $170,000; January sales were $200,000 and purchases of materials in January were $130,000. 

9.           The cash balance on 1stMarch is $5,400. 

Required:

1.        Prepare the following for the month of March. Please round all figures to the nearest dollar amount.  

a.        Schedule of cash receipts for March 

b.        Schedule of cash payments for March 

2.        Prepare a cash budget for March 

Answer rating: 100% (QA)

Solution 1A The schedule of cash receipts is provided below ... View the full answer