Name: ___________________

Section: _______________

Strategic Business Analysis

Short-term Budgeting
Exercises

1. Perseverance Company is preparing its cash budget for next year. Budgeted sales for four months are
as follows:
April P 80,000
May 160,000
June 240,000
July 80,000
Fifty percent of total sales is cash sales. The balance, or the credit sales, is collected in the
following manner:
70% in the month following the sale
20% in the second month following the sale
10% in the third month following the sale
How much is the budgeted cash receipts in July?

Items 2-7 are based on the following information

Pasol Company has just prepared its master budget for the year 2015. Some of the information used in the
preparation of such budget is as follows:

1. Budgeted sales: January P 480,000

February 520,000
March 560,000
April 500,000
May 576,000
June 640,000
2. Twenty percent of total sales is cash sales. The collections pattern for the sales on credit is as
follows:
30% in the month of sale
40% in the month after the month of sale
25% in the second month after the month of sale
3. Pasol Company’s gross margin rate is 60% of sales.
4. Accounts payable arising from merchandise purchases is paid for in the month following the
purchase
5. The company desires an inventory at the end of each month equal to 30% of the next month’s
sales in units.
6. The variable operating expenses (other than cost of goods sold) are 10% of sales and are paid for
in the month following the sale.
7. The annual fixed operating expenses are as follows:
Depreciation P 336,000
Advertising 576,000
Insurance 144,000
Salaries 864,000
Property taxes 192,000
8. All of the fixed operating expenses are incurred uniformly throughout the year. Cash fixed
operating expenses are paid in the month of incurrence, except for:
- Insurance – paid quarterly in January, April and July
- Property taxes – paid twice a year in April and October
2. The budgeted cash collections in March for the sales made in March is
3. The budgeted cash receipts for the month of April is
4. The budgeted purchases of merchandise for February is
5. The budgeted cash disbursements for operating expenses (other than cost of goods sold) during the
month of April is
6. The budgeted cash disbursements to be made in April for merchandise purchases is
7. Assume that the expected cash balance at the beginning of April is P 51,600. How much is the
budgeted cash balance as of April 30?
Items 8 – 10 are based on the following information
Traders, Inc. uses accrual accounting. Its balance sheet as of the end of the third quarter of the calendar
year 2015 is shown on the following page:

TRADERS, INC.
Balance Sheet
September 30, 2015

Assets Liabilities and Equity

Cash P 416,000 Accounts payable P 1,400,000
Accounts receivable, net 1,200,000 Capital stock 7,200,000
Merchandise inventory 2,520,000 Retained earnings 3,536,000
Non-current assets 8,000,000

Total liabilities and

Total assets P 12,136,000 Stockholders’ equity P 12,136,000
Additional information:
• Budgeted sales for October is P 4,160,000; for November, P 4,000,000
• Gross profit rate is 20%
• Of the total sales, 40% is on credit which the company collects in the month following the month
of sale.
• Purchases in each month are composed of:
80% of the coming month’s requirement
20% of the current month’s requirement
• Purchases are paid for in the month following the month of purchase
8. The budgeted cash collections for the month of October is
9. Budgeted purchases during October is
10. The budgeted gross profit for the month of October is