3. (TCO D) The Oxford Company has budgeted sales revenues as follows. Jan Feb Ma

Question

3. (TCO D) The Oxford Company has budgeted sales revenues as follows. Jan Feb Mar Credit sales $240,000 $192,000 $144,000 Cash sales 144,000 408,000 312,000 Total sales 384,000 600,000 456,000 Past experience indicates that 60% of the credit sales will be collected in the month of sale and the remaining 40% will be collected in the following month. Purchases of inventory are all on credit, with 60% paid in the month of purchase and 40% in the month following purchase. Budgeted inventory purchases are $520,000 in January, $360,000 in February, and $168,000 in March. Other budgeted cash receipts include (a) the sale of plant assets for $98,800 in February and (b) the sale of new common stock for $134,800 in March. Other budgeted cash disbursements include (a) operating expenses of $54,000 each month, (b) selling and administrative expenses of $100,000 each month, (c) dividends of $152,000 to be paid in February, and (d) purchase of equipment for $48,000 cash in March. The company has a cash balance of $80,000 at the beginning of February and wishes to maintain a minimum cash balance of $80,000 at the end of each month. An open line of credit is available at the bank and carries an annual interest rate of 12%. Assume that all borrowing is done on the first day of the month in which financing is needed and that all repayments are made on the last day of the month in which excess cash is available. Also assume that there is no outstanding financing as of February 1. Requirements: Use this information to prepare a schedule of expected cash collections from customers for the months of February and March only. This question does not require creation of an entire cash budget so please only create the schedule that is asked for in the question because otherwise you will be wasting valuable time.

Explanation / Answer

Cash Receipts Feb March Beginning Cash balance 80000 180000 60% of credit sales realised 115200 86400 cash sales 408000 312000 40% sales realised in cash next month 76800 sale of plant assets 98800 issue of common stock 134800 Total 702000 790000 Cash Payments Feb March Cash paid in month of purchase(60%) 216000 100800 Cash paid innext month of purchase(40%) 144000 operating expenses each month 54000 54000 selling and administrative 100000 100000 dividends paid 152000 purchase of equpment 48000 Total 522000 446800 Balanceon month end 180000 343200

Related Questions

Navigate

• Browse (All)
• Browse 3
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.