PROBLEM 9-12 Schedules of Expected Cash Collections and Disbursements [L02] Prob

Question

PROBLEM 9-12 Schedules of Expected Cash Collections and Disbursements [L02] Problem 9-12: Connect Animation Click here to view the Transcript Calgon Products, a distributor of organic beverages, needs a cash budget for September. The following information is available: a. The cash balance at the beginning of September is $9,000. b. Actual sales for July and August and expected sales for September are as shown below. Sales on account are collected over a three-month period as follows: 10% collected in the month of sale, 70% collected in the month following sale, and 18% collected in the second month following sale. The remaining 2% is uncollectible: AugustSeptember July 6,500 7400 ash sales. sesonaccart 5,250 .. 326 5003250 c. Purchases of inventory will total $25,000 for September. Twenty percent of a month's inventory purchases are paid for during the month of purchase. The accounts payable remaining from August's inventory purchases total $16,000, all of which will be paid in September. d. Selling and administrative expenses are budgeted at $13,000 for September. Of this amount, e. Equipment costing $18,000 will be purchased for cash during September, and dividends f The company maintains a minimum cash balance of $5,000. An open line of credit is available $4,000 is for depreciation. totalling $3,000 will be paid during the month. from the company's bank to bolster the cash position as needed. Assume any borrowings occur at the beginning of the month and repayments occur at the end of the month. Interest on outstanding loan balances during the month must be paid at the end of each month. The monthly interest rate is 0.5%. Required: 1. Prepare a schedule of expected cash collections for September 2. Prepare a schedule of expected cash disbursements during September for inventory purchases. 3. Prepare a cash budget for September. Indicate in the financing section any borrowing that will be needed during September

Explanation / Answer

July August September Cash Sales $6,500 $5,250 $7,400 Sales on account $20,000 $30,000 $40,000 Total sales $26,500 $35,250 $47,400 Collection from cash sales $6,500 $5,250 $7,400 10% collection for the month of sale $2,000 $3,000 $4,000 70% collection in the monthg following sale $14,000 $21,000 $28,000 18% Collection in second month following sale $3,600 $5,400 $7,200 1 EXPECTED CASH COLLECTION FOR SEPTEMBER Collection from Cash Sales $7,400 Collection from credit sales of September $4,000 Collection from credit sales of August $21,000 Collection from credit sales of July $3,600 Total Cash collection for September $36,000 2 EXPECTED CASH DISBURSEMENT FOR SEPTEMBER Account payable remaining from August paid in September $16,000 Payment for September purchase $5,000 (0.2*25000) Selling and administrative expenses $9,000 (13000-4000) Equipment purchase $18,000 Dividend payment $3,000 Total expected Cash disbursement $51,000 3 CASH BUDGET FOR SEPTEMBER A Beginning Cash Balance $9,000 B Cash Collection $36,000 C=A+B Total Cash available $45,000 D Cash disbursement $51,000 E=C-D Net cash available after disbursement ($6,000) F Minimum balance required $5,000 G Amount Borrowed /(Loan repaid) $11,055 H=G*0.5 Interest payment ($55) I=E+G+H Ending cash Balance $5,000

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