Scribd
Upload
410 views4 pages

Exercises 3Ms

Watson Limited provided budget information for sales, direct wages, direct materials, and other expenses for June through September. This included that 10% of sales are for cash, the rest are on 1 month credit. Materials and overhead expenses are on 1 month credit. Wages are paid as incurred. A delivery vehicle will be purchased in August for $9,870 cash. The cash balance at end of June is $1,235. The cashflow budget is to be prepared for July through September showing monthly receipts, payments, net cash flow, opening and closing balances.

Uploaded by

Bhodza
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
410 views4 pages

Exercises 3Ms

Watson Limited provided budget information for sales, direct wages, direct materials, and other expenses for June through September. This included that 10% of sales are for cash, the rest are on 1 month credit. Materials and overhead expenses are on 1 month credit. Wages are paid as incurred. A delivery vehicle will be purchased in August for $9,870 cash. The cash balance at end of June is $1,235. The cashflow budget is to be prepared for July through September showing monthly receipts, payments, net cash flow, opening and closing balances.

Uploaded by

Bhodza
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 4

Exercise1: cashflow budget

Watson limited is preparing its budgets for the next quarter. The following information has been drawn from the
budgets prepared in the planning exercise so far
sales value
June (estimate)
$12,500
July (budget)
$13,600
August
$17,000
September
$16,800
Direct wages

$1300 per month

Direct materials

June (estimate)
July (budget)
August
September

$3,450
$3,780
$2,890
$3,150

Other information

Watson sells 10 per cent of its goods for cash. The remainder of customers receive
one months credit.
Payments to creditors are made in the month following purchase.
Wages are paid as they are incurred.
Watson takes one months credit on all overheads.
Production overheads are $3,200 per month.
Selling, distribution and administration overheads amount to $1,890 per month.
Included in the amounts form the overhead given above are depreciation charges
of $300 and $190 respectively.
Watson expects to purchase a delivery vehicle in august for cash payment of
$9,870
The cash balance at the end of June is forecast to be $1,235
You are required to prepare a cashflow budget for each of the months July to September

Solution
Watson Ltd cashflow budget for July to
September
July
$
Sales receipts:
10% in cash
90% in one month
Total receipts
Payments
Material purchases (one month credit)
direct wages
Production overheads
Selling, distribution and administration overhead
Delivery vehicle
Total payments
Net cash inflow/outflow
Opening cash balance
Closing cash balance at the end of the month

August
$

September
$

Exercise 2

You might also like