Zearph Ltd is preparing to set up business on 1/7/2022 and has made the following forecast for the first six months of trading:

	JUL	AUG	SEPT	OCT	NOV	DEC	TOTAL
Sales	$525,000	588,000	616,000	630,000	658,000	672,000	3,689,000
Purchases	$300,000	336,000	352,000	360,000	376,000	384,000	2,108,000

The expected selling price is $70 per unit.
 

The cash collection pattern from debtors is expected to be:
 

Cash customers - 30% of sales revenue will be for immediate cash and cash discount of 5% will be allowed.
 

Credit customers - 70% of sales revenue will be from credit customers. These creditors will pay their bills 50% in month after sale and the remainder in the second month after sale.
 

The purchases will be paid for 50% in month after purchase when 2% cash discount will be received. The remaining purchases will be paid for in the second month after purchase.
 

Expected costs: Wages $45,000 per month payable as incurred. Variable overheads $10 per unit payable as incurred. Fixed overheads (including depreciation) $52,000 per month payable as incurred.
 

Equipment will be purchased in July costing $48,000 which will have a useful life of 5 years. To finance this purchase a loan of $50,000 will be secured at the rate of 10% per annum. Interest to be paid monthly, but capital loan repayments will not commence until January 2023.
 

Answer the following questions listed below: 
 

1. Prepare schedule of budgeted cash collections for sales for each of the months July to December, 2022.
 

2. Prepare schedule of budgeted cash disbursements for purchases for each of the months from July to December, 2022
 

3. Prepare cash budget for six months July to December 2022.

Answer rating: 100% (QA)

To prepare the schedule of budgeted cash collections for sales we need to calculate the cash receive... View the full answer