(Solution) 14 Budget Preparation Of Receipts From Debtors Schedule And Cash Elvstrom Company Prepares Monthly Cash Budgets. Provided Below Is A Set Of Relevant... | Snapessays.com


(Solution) 14 budget Preparation of receipts from debtors schedule and cash Elvstrom Company prepares monthly cash budgets. Provided below is a set of relevant...


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Preparation of receipts from debtors schedule and cash

 

budget

 

Elvstrom Company prepares monthly cash budgets. Provided below is a

 

set of relevant data extracted from existing reports, and the sub-budgets

 

for the two months of September and October 2011.

 

All sales are on credit. Collections from debtors normally have the

 

following pattern: 60 per cent in the month of sale, 30 per cent in the

 

month following the sale, and 10 per cent in the second month following

 

the sale. Fortunately, Elvstrom does not have much trouble with bad

 

debts.

 

Sales in June, July and August were $295 000, $266 000 and $302 000

 

respectively. Direct material purchases are paid for in the month following

 

the purchase. Purchases in August were $182 000. Manufacturing

 

overhead includes $12 500 for depreciation expense, while the marketing

 

and administration expenses include an amount o± $5600 for depreciation

 

expenses. Elvstrom expects to be able to repay the principal on a $50 000

 

loan in October.

 

Required

 

(a) Prepare a schedule of receipts from debtors for the two months

 

ending 31 October 2011.

 

(b) Prepare a cash budget for September and October 2012. The cash

 

balance at 31 August 2011 was $12 600.

 

(c) As part of its longer term plans, Elvstrom was hoping to commence a

 

product reinvention program for one of its core products. The project

 

would require an initial cash commitment of $30 000. Management

 

was hoping to fund this from the cash ² ows of the business. Does

 

this seem feasible?

 


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This question was answered on: May 23, 2022

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