QUESTION 2 (20 marks) Part A (15 marks) The marketing and promotion department o

Question

QUESTION 2 (20 marks) Part A (15 marks) The marketing and promotion department of Paul Corporation has submitted the following sales forecast for the upcoming fiscal year 3 Quarter 4h Quarter 15,000 2nd Quarter 1st Quarter 16,000 15,00014,000 Budgeted unit sales The selling price of the company's product is $22.00 per unit. Management expects to collect 75% of sales in the quarter in which the sales are made, 20% in the following quarter, and 5% of sales are expected to be uncollectible. The beginning balance of accounts receivable, all of which is expected to be collected in the first quarter, is $66,000. Required: (5 marks) 1. Prepare the company's sales budget. 2. Prepare the company's schedule of expected cash collections. (10 marks) Part B (5 marks) Enciso Corporation is preparing its cash budget for November. The budgeted beginning cash balance is $31,000. Budgeted cash receipts total $135,000 and budgeted cash disbursements total $141,000. The desired ending cash balance is $50,000. The company can borrow up to $100,000 at any time from a local bank, with interest not due until the following month. Required: Prepare the company's cash budget for November in good form. (5 marks)

Explanation / Answer

Part A

1. Sales budget will be prepared as follows:

2. Schedule of expected cash collections will be prepared as follows:

Above figures have been computed in the following manner:

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Budgeted unit sales (A) 16000 15000 14000 15000 60000 Seling price per unit (B) 22 22 22 22 22 Budgeted sales in dollars (A x B) 352000 330000 308000 330000 1320000

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