Khole Company imports gift items from overseas and sells them to gift shops and

Question

Khole Company imports gift items from overseas and sells them to gift shops and department storees through out the US. Khole Company provided the following info:

a. The october 31 balance in the cash account is 53,817.

b All sales are on account. Sales in September were 950,000 and in October were 1,240,000

c. Nov sales are expected to be 2145000.00

d In Khole's experience 70% of sales are collected in the month of sale and 28 % are collected in the month following sale. The remaining credit sales are uncollectable.

e.Khole purchases all merchandise on account. Purchases in September were 750,000 and in Oct were 980000. Nov purchases are expected to be 2000000 as Khole prepares for Xmas. 15% of purchases are paid in the month of purchase, while the remainder is paid in the purchase month.

fKhole Co has 9 employees who are paid a total of 48,000 per month. Due to timing issues 90% of total wages are paid in the month earned and remaning 10 percent are paid in following month.

g rent for office and warehouse space is 12300 paid in monthly cash.

i In Nov Khole expects to pay employment taxes of 6625.

j Since Khole imports product from overseas custom duty and shipping to central location of 30% of monthly purchase must be paid in monthof purchase.

other cash expenses for Nov are expected to be 41500.

1. Prepare a cash budget for Khole Co for the month of Nov

2. What if Khole faced a customs duty and shipping % of 35 percent? How would that affect November cash budget.

Khole Company imports gift items from overseas and sells them to gift shops and department storees through out the US. Khole Company provided the following info: The october 31 balance in the cash account is 53,817. All sales are on account. Sales in September were 950,000 and in October were 1,240,000 Nov sales are expected to be 2145000.00 In Khole's experience 70% of sales are collected in the month of sale and 28 % are collected in the month following sale. The remaining credit sales are uncollectable. Khole purchases all merchandise on account. Purchases in September were 750,000 and in Oct were 980000. Nov purchases are expected to be 2000000 as Khole prepares for Xmas. 15% of purchases are paid in the month of purchase, while the remainder is paid in the purchase month. fKhole Co has 9 employees who are paid a total of 48,000 per month. Due to timing issues 90% of total wages are paid in the month earned and remaning 10 percent are paid in following month. g rent for office and warehouse space is 12300 paid in monthly cash. i In Nov Khole expects to pay employment taxes of 6625. j Since Khole imports product from overseas custom duty and shipping to central location of 30% of monthly purchase must be paid in monthof purchase. other cash expenses for Nov are expected to be 41500. Prepare a cash budget for Khole Co for the month of Nov What if Khole faced a customs duty and shipping % of 35 percent? How would that affect November cash budget.

Explanation / Answer

Hi,

Please find te answer as follows:

Part 1: Cash Budget for November

Part 2: Cash Budget with Revised Custom and Shipping Duty

As a result of increase in custome duty, the November's cash balance would go down to - 38908.

Thanks.

Cash Balance as on 1st November 53817 Cash Receipts
Cash Sales (2145000*.70) 1501500 Collection from Customers (1240000*.28) 347200 Total Cash Available (A) 1902517

Cash Payments
Cash Purchase (2000000) 300000 Payment for Credit Purchases (980000*.85) 833000 Wages 48000 Rent 12300 Employment Taxes 6625 Custom and Shipping Duty (2000000*.30) 600000 Other Cash Expenses 41500 Total Cash Payments (B) 1841425

Cash Balance as on 30th November (A-B) 61092

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