Accounting Business Reporting for Decision Making

CHAPTER 9 Budgeting 407

9.22  LO5

From the following data for Wang Enterprises, calculate the receipts from accounts receivable for

June, July and August of 2018.

Actual Estimated

April May June July August

Credit sales $168 000 $176 000 $186 000 $164 000 $165 000

Credit sales are normally settled according to the following pattern: 60 per cent in the month

following sale, and 35 per cent in the second month following the sale. Five per cent of accounts

are never settled.

9.23  LO5

Ski Lifters is a business that provides a chairlift for tourists in the Alpine region. The peak season is

in winter, with the low season during the summer months. Sales are high during the ski season and

then taper off once the season closes. Explain why preparing a cash budget might be particularly

important for Ski Lifters.

9.24  LO6

During late 2016, Ski Lifters commenced a new business in the Alpine region to rent ski gear

to tourists. A budget has been prepared for the coming financial year. Prepare a brief report to

management on how the budget can be used as a control device to monitor actual performance.

9.25  LO7

One of the downsides of using a participative style of budgeting is the possibility of ‘budgetary

slack’. Explain whether you consider the strengths of a participative style of budgeting outweigh

the problems associated with ‘budgetary slack’.

9.26  LO4

Kyle Company makes specially designed coffee mugs. The entity has developed its web page and is trying

to switch customer behaviour to this form of medium. Sales for each quarter of 2017 were as follows.

Quarter ending

31 March

30 June

30 September

31 December

$117 000

114 000

115 500

201 000

Due to the change in sales strategy, the marketing department at Kyle Company expects sales to grow

by 20 per cent in each quarter in 2018. The unit sales price will be the same as 2017, at $15 per unit.

Required

Prepare a sales budget for 2018.

9.27  LO5

Ainsworth Enterprises has provided the following estimates relating to the first quarter of 2018.

Cash sales

Credit sales

Receipts from accounts receivable

Cash payments:

Wages

Office furniture

Utilities expenses

Administrative expenses

Depreciation on office furniture

Receipt of loan

Credit purchases

Payments to accounts payable

$80 960

162 624

125 840

95 040

22 176

6 688

24 816

554

26 400

115 456

93 104

The cash balance at 1 January 2018 was $19 800.