Question 1:

Bluebird Ltd has provided the estimates below for the July-September quarter in 2017.

JulyAugustSeptember

$$$

Sales13,00014,00015,000

Purchases9,4008,00010,000

Operating expenses3,6006,4005,000

You are also given the following additional information:

35% of sales are cash sales, the remaining 65% credit sales are collected as follows:

o30% in the month of sale

o40% in the month after sale

o28% 2 months after sale

o2% lost in bad debts

Sales in the months of May and June were $11,000 and $10,000 respectively.

Operating expenses include depreciation each month of $900. All expenses and purchases are paid for in the same month they are incurred.

The firm expects to sell some old machinery for $7,000 in August. New machinery worth $9,500 will be purchased in September.

The cash balance on 1st July 2017 is $5,700.

REQUIRED:

a) schedule of receipts from accounts receivable showing the collections in the three months July to September.

b) cash budget for Bluebird Ltd for the three months July to September.