Relevant data from Picta Company’s operating budgets are presented below. The company’s financial year ends on 30 June.                Quarter 1Quarter 2Sales$248,470$251,539Direct material purchases120,295128,832Direct labor76,55374,289Manufacturing overhead26,00024,400Selling and administration expenses33,50033,500Depreciation included in selling and administration expenses 2,000 2,500   Collection from customers230,524220,116Cash payments for purchases114,345118,346 Additional data:Equipment was sold in July for $8,000 and $4,500 in November. Dividends of $5,500 were paid in August. The beginning cash balance was $80,395 and a required minimum cash balance per quarter is $60,000. The company has a 15% open line of credit for $70 000 with their bank. Required: a) Use this information to prepare a cash budget for the first two quarters of the year. bi) Briefly comment on Picta Company’s expected cashflow position in the first two quarters of the year.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Relevant data from Picta Company’s operating budgets are presented below. The company’s financial year ends on 30 June.                Quarter 1Quarter 2Sales$248,470$251,539Direct material purchases120,295128,832Direct labor76,55374,289Manufacturing overhead26,00024,400Selling and administration expenses33,50033,500Depreciation included in selling and administration expenses 2,000 2,500   Collection from customers230,524220,116Cash payments for purchases114,345118,346 Additional data:Equipment was sold in July for $8,000 and $4,500 in November. Dividends of $5,500 were paid in August. The beginning cash balance was $80,395 and a required minimum cash balance per quarter is $60,000. The company has a 15% open line of credit for $70 000 with their bank. Required: a) Use this information to prepare a cash budget for the first two quarters of the year. bi) Briefly comment on Picta Company’s expected cashflow position in the first two quarters of the year.
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