Bluebird Ltd has provided the following forecasted items for the months of July through to September 2020.

July August September
$ $ $
Sales 13,000 14,000 15,000
Purchases 9,400 8,000 10,000
Operating expenses 3,600 6,400 5,000


Other Information:

  • 35% of Sales are cash sales, the remaining 65% of credit sales which are collected as follows:
    • 30% in the month of the sale
    • 50% in the month after the sale
    • 28% in the 2nd month after the sale
    • 2% are never collected due to the customer going bankrupt
  • Sales in the months of May and June were $11,000 and $10,000 respectively.
  • Operating expenses include depreciation expense. Depreciation expense each month is $900. All expenses and purchases are paid for in the same month that they are incurred.
  • Bluebird expects to sell some old machinery for $7,000 in August. New machinery worth $9,500 will be purchased in September.
  • The cash balance on 1st July 2020 is $5,700.


  1. Prepare a schedule of the Cash receipts from Accounts receivable showing the collections for the three months of July through to September.
  2. Prepare a Cash budget for Bluebird Ltd for the three months of July through to September 2020.

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