Question 1. Cool-Ice’s balance sheet for 30 November follows. Use it and the following information to prepare a cash budget for Cool-Ice for December.
80% of sales are on account, of which half are collected in the month of the sale, 49% are collected the following month and 1% are never collected and are written off as bad debts.
All purchases of materials are on account. Cool-Ice pays for 70% of purchases in the month of purchase and 30% in the following month.
All other costs are paid in the month incurred.
Cool-Ice is making monthly interest payments of 1% (12% per year) on a $20 000 long-term loan.
Cool-Ice plans to pay the $500 of taxes owed as of 30 November in the month of December. Income tax expense for December is zero.
40% of processing and set-up costs, and 30% of marketing and general administration costs, are depreciation.
