The following information is provided to assist in the preparation of the Cash Budget for Ding Ltd. for May 2020.The cash balance at 1 May 2020 is $30,000. Budgeted Sales ($)Budgeted Purchases ($)April170,00064,000May140,00068,000 All sales are on cash basis and will be collected in the same month the sale is made.All purchases are made on credit and payments are made as follows:60% of purchases are paid for in the month of purchase.40% of purchases are paid for in the month following the purchase.The business plans to take out a small business loan of $50,000 at the end of May 2020 and will be repaying it back in July 2020.Selling and administrative expenses each month are $45,000.The selling and administrative expenses include monthly depreciation expense of $6,000.Sales commission is 15% of the total monthly sales, and paid to the staff at the end of every month.Equipment costing $35,000 is expected to be bought in May and paid in full with cash.The business owner withdraws $10,000 every month. Required: Prepare a cash budget for the month of May 2020.

The cash budget is a statement that provides a business with the forecasts of its cash flow.

Answered: The following information is provided…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The following information is provided to assist in the preparation of the Cash Budget for Ding Ltd. for May 2020.

The cash balance at 1 May 2020 is $30,000.

	Budgeted Sales ($)	Budgeted Purchases ($)
April	170,000	64,000
May	140,000	68,000

All sales are on cash basis and will be collected in the same month the sale is made.
All purchases are made on credit and payments are made as follows:
60% of purchases are paid for in the month of purchase.
40% of purchases are paid for in the month following the purchase.
The business plans to take out a small business loan of $50,000 at the end of May 2020 and will be repaying it back in July 2020.
Selling and administrative expenses each month are $45,000.
The selling and administrative expenses include monthly depreciation expense of $6,000.
Sales commission is 15% of the total monthly sales, and paid to the staff at the end of every month.
Equipment costing $35,000 is expected to be bought in May and paid in full with cash.
The business owner withdraws $10,000 every month.

Required:

Prepare a cash budget for the month of May 2020.

Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.

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